Moderate Medicine

“Moderation in all things” seems a sensible rule of thumb. But for some economists, when it comes to government spending, you can’t get too much.

For months, Nobel-laureate Paul Krugman has been berating the Obama administration for its stinginess in only approving a $700 billion stimulus package. After all, global real estate probably declined by about $5 trillion. If half of that occurred in the U.S., then the government is making up only a fraction of the loss.

It’s understandable that many people want a pain-free recession. So they’re pushing for a bigger bailout. But there are limits to everything. When your body’s sore, a little Tylenol helps. But if the pain persists, most people know enough not to swallow the whole bottle. The federal deficit is now scheduled to run at 8% of GDP-6% above its normal recession peak. Any more medicine may just make this patient more sick.

Moderation means walking down the middle of the road. But it seems that any moderates here are likely to be run over by a government steamroller.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-04T18:34:41+00:00 June 9th, 2009|Global Market Update|0 Comments

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