Tuesday, June 21, 2011

More Economic Stimulus Now?

Suppose Charlie got into a wreck with his car and was seriously injured. Let’s suppose he had multiple internal injuries that were very painful.

The emergency technicians gave Charlie some pain killers and sped him off to a hospital where he was attended to by some famous physicians. The medical team knew the sources of the injuries were in the abdomen but they were not positive about the exact nature of the internal injuries. So they decided to operate.

As sometimes happens, the operation produced more than one theory about the best course of action. It seems that more than one organ was injured and plans to improve one trouble spot would greatly irritate another. They sewed Charlie back up, gave him some pain medicine to deal with the ramifications of the surgery and decided to wait and see for a while.

Dr. Mean, a nationally known kidney specialist noted to Charlie and his family that the patient was in really bad shape but was lucky to have such a prominent practitioner on his case. Dr.  Nice, a recent winner of the Best Liver Surgeon in Alabama Award took pictures with the family while he administered another round of pain medicine to Charlie. Drs Nice and Mean quibbled about the best way to proceed and made sure that Charlie had plenty of medicine to carry him through as they ordered test after test to measure the pace of Charlie’s healing.  Meanwhile the famous doctors went to their respective annual conventions and made stirring oratories about their latest contributions to vanquishing kidneys and livers.

Thankfully the medicine did get Charlie through the worst of the pain and he was able to walk and pinch nurses with that usual Charlie sparkle in his eye. Natural healing was taking place but it was clear that Charlie would never again hurdle fences or otherwise run from the police. Drs Nice and Mean were having daily meetings at the local pub discussing fervently the best approach to Charlie’s health issues but had still not hit on an approach that would deal with all the internal issues.

They did notice that Charlie was started to slur his words (more than usual) and they concluded that he might need a different pain medicine.  So they prescribed another one. Of course there was some debate about which drug might work best but eventually the doctors agreed on a new one. Charlie was happy enough but it was a little frustrating. The medicine made him want to dance with the nurses but unfortunately his internal injuries wouldn’t really allow for anything much beyond a one-minute polka.

Okay – this is getting a little tiresome and tedious right? But come on – is it not exactly the stupid story our politicians are telling us? Our great sage of the Fed notices that the economy is not running full tilt and tells us that we need to keep up the stimulus – unprecedented levels of stimulus. But has the Fed, the Congress or anyone else really attended to what caused the recession of 2008/2009? I don’t think so.  So they want to keep the I-V going as they and the rest of government avoid the real causes of our economic problems. The President says “be patient” and predicts that we will soon emerge from this temporary hiatus in growth. But he has done next to nothing to create real belief that some particular remedy is working.   

Have they spent the four years devising a solution that stops financial institutions from giving mortgages to people who cannot afford them? Have they effectively legislated actions that would prevent huge financial institutions from taking excessive risks behind closed doors? Have they done anything to even remotely encourage hedge funds to go back to hedging? Have they done one thing to prevent the government from having another half century of virtually back-to-back budget deficits? Have they really extinguished the factors that contribute to double-digit increases in health care costs? Have they made businesses be more flexible and competitive?

But you might argue – they have begun the process. They put in a stimulus program and lots of committees are dealing with new regulations. They know that it is time for the stimulus to end but some experts worry that we have to wait until the recovery is more solid.

Pasha! Give me another dose of pain medicine! This reminds me of the “old take-off the band-aid controversy.”  Should you take it off fast or do you take it off slow? With a quick rip you get an intense ripple of pain and then it is over. Imagine pulling off a large band-aid over the course of a couple of years. You get a little bit of pain each day for a long time. Perhaps you hope that over all that time some miraculous invention will intercede and the band-aid will just fall off without pain. But this approach guarantees nothing but pain and more pain. We would be in much better shape if the government had moved more quickly with some real remedies. Yet even today some say that there is no urgency. Harry Reid said the other day that there was no emergency to reduce the government deficits and debt.  He sees no problems on the horizon. PLEASE HARRY – stop the drugs and pull that damn band-aid off!

I know you can add to my list of diseased organs – troubled organs that our economic doctors continue to ignore over and over.  But whether or not you can agree on the size of the list, it seems easier for them to pump us full of pain medicine than to focus on real remedies. We are the patients and we seem completely addled by the drugs. So we shuffle our feet on the way to the bar and let them get away with it. And then we almost clap when things get worse and they order another round. Thank goodness our good doctors are treating pain! Unfortunately world investors are catching on to our game.  At some point even the pain medicine won’t do much good. Greece must now pay its creditors 30% for its loans. Perhaps we should think about this for a while as we sip our Greek coffees with a shot of Ouzo. 

14 comments:

  1. You will notice that I've had an identity crisis and a name change due to a computer-generated infection. No more "Crash"-ing around for me.

    I like what you have to say here. Quoting Harry Reid can be hazardous, but in this case the quote you used proved his total out-of-touchedness-with reality. Your entire burst here brings to mind a recent AARP TV spot. It ends with some old geezer looking at the camera and saying something to the effect "Write Congress and let them know that we won't stand for anybody taking away the things we've earned." Let me see. I believe he's saying that we've "earned" Social Security, Medicare, etc. Funny! I always thought that those were things the government decided that we needed just because...I always thought of Social Security and Medicare as things I was forced to contribute to so that all of those people who didn't want to work could have flat-screen LED's and iPhones to go along with their food stamps.

    Shovel-ready projects. Yep, Harry is one, and he keeps shoveling the manure on top of us mushrooms to keep us quiet. Greece? Nah! Never happen here! As Michael Moore says, "We don't have a national debt!" And if somebody like Michael Moore says it, you just have to believe it.

    Hows about another bar beertender!

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  2. Crash,

    Welcome back. Anyone who is related to Alfred E. is okay with me. Since I am almost as suspicious of companies as I am of the government, I used to be reasonably optimistic that SS and Medicare were reasonable compromises. But now that I see government virtually out of control I am almost ready to come over to your (the dark) side. I am guessing that these programs are going to sink us and our kids are going to be the ones holding the baG.

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  3. Well, now that one W.J. Clinton has offered 14 ways to increase employment, everything should be just peachy! I actually read each one. The only problem I could find with them is that they ALL REQUIRE HUGE OUTLAYS OF FEDERAL FUNDS! Silly me! What was I expecting? When you find yourself in a hole, isn't it time to stop digging?

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  4. Clinton is like a lot of people who confuse cause and effect. The problem is not in the labor market. Firms hire workers and firms need to feel more confident. They are not going to feel more confident until they see the government budget and regulatory environment improve. Anything else is tantamount to digging the whole you mentioned.

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  5. It really is kinda interesting here on the dark side. You should join us! As a matter of fact, we're having a party at Al's Corral in 1966.

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  6. http://moneymorning.com/2011/06/23/stealth-qe3-comes-to-fruition-soaring-inflation-is-next/

    He's joined the Dark Side, too.

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  7. "Under both Republican and Democratic leadership, past Congresses have created a fiscal sinkhole that is so deep and so wide, it threatens to swallow up our prosperity and render our economy an abattoir. They have forsaken the most sacred responsibility they have to successor generations of Americans: Instead of passing the torch to our children, they have passed them the bill." - Richard Fisher, President, FRB, Dallas

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  8. An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.

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  9. Al,

    And yet they keep paying us. Hmmm :-)

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  10. Yes, and they keep paying senators and representatives, too. Go figure!

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  11. Mr. LSD. Bottom line (pun unintended?), they be pick'n our pocket and we gotta stop it. Gotta stop the spending. Vote R 'cross the board in '12. Not a revenue problem; spending problem.

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