Count me as one of them.
I have argued strenuously that government corruption and missteps are at the heart of our economic crisis. I have argued loudly that government is misapplying the liquidity created by the Fed. I have pointed out that the very same people who got us into this mess are now ‘stimulating’ the economy. And I’ve observed that the market will ultimately dictate – regardless of further government distortion. I have advocated doing little or nothing apart from insuring adequate – but not excessive – liquidity.
The market must find its own equilibrium and the geniuses in Washington are going to turn a sharp – but short – contraction into something far worse.
It’s nice to know that there are folks far above my intellectual pay grade who seem to agree. From The Politico:
Most of Washington has reached quick consensus: Government must do something big to shock the economy, and it should cost between $800 billion and $900 billion.
But dissident economists and investment professionals offer a much different take: Most of Washington is dead wrong.
Instead of fighting over what should go in the economic stimulus bill, pitting infrastructure spending against tax cuts and contractors against contraceptives, they say lawmakers should be fighting against the very idea of any economic stimulus at all. Call them the Do-Nothing Crowd.
“The economy was too big. It was all phantom wealth borrowed from abroad,” says Andrew Schiff, an investment consultant at Euro Pacific Capital and a card-carrying member of the stand-tall-against-the-stimulus lobby. “All this stimulus money is geared toward getting consumers spending and borrowing again. But spending and borrowing were the problem in the first place.”
Economic bailouts and stimuli of all kinds do indeed have a terrible track record – and they’re based on a fallacy: that we can maintain the current level of wages and prices at unsustainable levels. “Our standard of living needs to come down to the point where it can be supported by organic output,” says [Andrew] Schiff. “It’s brutal, but it’s called capitalism, and it works. The alternative is called socialism, and it doesn’t work.”
Another fallacy is that because recessions are painful they are therefore all bad. In fact, recessions are the way we periodically strengthen ourselves: they discipline us, cull weak companies from the economy and focus the survivors on providing goods and services that people really want and need.
But there’s also a moral component – usually overlooked – in the current stimulus plan: when we borrow so massively we imperil our descendants. Do we have the moral right to cripple them in a futile attempt to palliate our present pain – pain, I might add, that’s entirely our own doing.
I think not.
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