Do You Think Economic Stimulus Checks Were Really To Stimulate The U.S. Economy?

True, Korr. The Fed tries to manage to things at once. And you referenced how this action (in the OP) was not from the FED but from the administration and Congress.


Anyone who has ever run a business, let alone a large business, let alone trys to manage a regional economy...or bigger yet a state economy....or bigger yet a national economy has to realize that there are NO givens.

When running things....you hopefully do your research, call upon your experience, get a lot of advice and act....and then you take your shots....hoping for a positive outcome.

When Bush proposed this plan, and the congress debated/altered/ and finally approved it with some changes....it was months before the enormous run up in costs that have hit more recently. The inflationary impact on fuel and other costs was minimal compared to what it has been in the last few months.

You might recall...while gas was running at about $3.00-$3.25/gallon...Bush was thrown a question by a reporter...asking something about prospective $4.00/gallon gas prices. Bush was surprised and his answer was something to the tune of " ....nobody told me that".....(the guy is not real engaged).

Bush, constricted by his beliefs, his constituency, and the enormous budget deficit has only the mildest tools to try and manage the budget.

I hope he thought the checks were to stimulate the economy. When proposing and passing the legislation it was way before this inflationary hit.

The net result is that much of the cash only goes to stem off the impact of inflation.

A couple of things of interest. The checks did not go to high earners. There was a cutoff on income.

Two; there was an uptick on domestic spending (after considering for inflation) for April. Not big...not huge but higher than economists predicted. Some commentators suggest that the impact was the result of checks going back into the economy.

If there is any truth to that it suggests to me that the tax cuts Bush made through the early part of the decade were misdirected. Most of the cuts went to reduce high income taxes....with dramatically lower reductions for those with less income. The big winners have been the wealthy.

While there are all sorts of theories thrown out on how that stimulates the economy my personal experience is that the theories are bunk.

When my businesses flourish and I'm rolling in cash the extra money from big tax cuts are great....but what do I do with the money...and how does it potentially stimulate the economy?

If there are REAL opportunities to reinvest in the businesses to make even more money....I'll do that. Experience has tought me though that growth isn't always there.

I can save or reinvest in things I don't control, I can look at other purchases...or I can enjoy the money in rich guy stuff.

That typically means getting better service or more fancy stuff from people who don't make that much. The only time there is real stimulous is if there are real investment opportunities.

And they aren't endless. For those who follow the world's number one investor, Warren Buffet, you'd know that he sat on piles of cash for years before some fairly recent major investments. His reason. Prices were too high. Don't believe that extra cash in business invariably leads to productive investment.

Its a major lie.

The surge in buying in April went to the folks who need it and they put it right back into the economy. I'd seriously look at redirecting tax cuts.

As to Bush's stimulus package......it looks like its all being eaten by inflation. So much for any substantial stimulus......not that it might have had a huge impact when one takes a look at the gross size of the stimulus rebates versus the gross size of the economy.

Just my $0.02

 

You really don't believe making people pay more for good built in the United States will actually make America Better do you?

 

Yep, Bush really shined in that moment. People have already made spoofs of that video.

Bush is so out of touch with reality that it is pathetic...

 

Earl I agree with most of your post, there are a few points where I might just be a little more jaded.

I never saw this when I worked in college and local governments. There's a dominant assumption that government income is ever-increasing, its the same type of thinking that leads to employment contracts with guaranteed minimum annual raises. Now, you said they have to realize it doesn't work that way, but it seems we will learn the hard way.

I've always worked with the assumption that fiscal and monetary policies take about six months from the time they're enacted to reach their full effect. There's some immediate effect when markets make their initial reaction, but a longer period of inching up and down to test varying equilibrium points.

High SS numbers still haven't received checks (I got my third notice this week that the check is in the mail)

and the federal reserve and FDIC are still announcing new interventions to fight off the dreaded "d" words (default, deflation, depression). I'm almost confident that they'll achieve $6 gas by Christmas with American demand destruction all but off-set by continued consumption growth in nations that use the energy more efficiently.

But this goes to one of the great paradoxes of why things won't change anytime soon. The most regressive taxes are the ones with the strongest populist connotations - Social security, medicare, etc...

Under one of the "better" national health-care proposals for a non-profit system, another 9% would be tacked onto payroll. 22% of every five-figure employees' wage would be taxed - before personal income tax rates are applied. There would also be a 1/3 of 1% tax on capital gains.

Somehow, Kucinich and Feingold can sign on to these things and be proclaimed champions of the little guy. I guess the little guy doesn't like fine print and math.

 

Kucinich is terrible on economics. And I know he compromises, but can live with that because he fights a lot of important battles. A House full of Ron Pauls and DKs would be amazingly better than what we have today.

 

I live in Kucinich's district, and I can say he is horrible on everything including economics. The only thing he may be good at is avoiding the problems of his district.

Let me tell you how shady Kucinich is. A while back (2 years), I wrote Kucinich an E-mail complaining about the taxes (cigarettes, property taxes, etc.). No, I don't smoke, and I am tired of my high property taxes subsidizing other school districts in Ohio. Anyway, it took two years for Kucinich to respond to that E-mail. It just so happens it was at the time he was running for re-election and had stiff competition from another candidate named Cimperman. Anyway, Kucinich wrote in the letter that he was concerned about taxes too. That was one sentence. The remainder of the letter was about how he is trying to get re-elected to deal with the tax problems and other issues facing my district. In a nutshell, Kucinich used taxpayer money to send me that letter and promote his re-election. Sure, the "loophole" is that he did respond to my E-mail with the one sentence blurb. But two years to respond when the majority of his response was regarding his re-election? Come on.

I don't know why people vote for him. From flying saucers to attempts to impeach a President that will be out of office soon are just some examples of his weird agenda. There are too many problems in his district and the nation to waste time on such nonsense...

 

Conditions within the economy are miserable. Its rough no doubt.

I lived and worked through the recession of the late 1980's/early 1990's. During the extended period during which the recession was actually recorded, the lead up to it...and the period after it approximately 1,000 community banks failed. They were primarily Savings and Loans, but also banks.

Those institutions carried insured deposits. I believe, if sourced from reliable reviews one would find a then calculated loss of about $500 billion in bank equity and about a $150 billion bailout of which the feds put up about $125 billion and the institutions put about $25 billion. The bailout was financed by govt bonds. The bailout was provided to support the lost equity in institutions that represented YOUR and MY deposits within those banks.

The recession had deep roots that took about a decade to cause an ultimate crash....and in many ways the fullness of recovery in some sectors was not felt for a decade.

That recession was rooted in commercial real estate loans made by S & L's. At its peak it caused a depression in commercial real estate, had a downward impact on residential real estate, severely impacted overall lending within the economy, caused overall slowness, etc. etc. etc.

Of interest, while there was underlying evidence of the upcoming commercial real estate implosion and other mixed signals within the economy, from the summer of 1987 through autumn the stock market trended downward seriously. On October 19, 1987, known as Black Monday, the Dow Jones lost 25% of its value. On the morning of that day I had an important meeting with the head of a regional investment brokerage firm with my business partner and his real estate attorney. We were all there to review the first draft of a lease for the investment firm's central office space.

When the firm's CEO walked into the office he said something to this effect to the attorney...."....You better talk and talk fast, today is going to be one of the worst days of my professional career. Before I left the office in the morning the Dow Jones had lost (about 8% of value and rebounded about 4%) and as he walked out the door to our meeting it started tumbling downward again. (The good news was the lease we had negotiated was so damn good that the attorney first words were something like this "this deal is so good" I'm going to have to write in protections on your behalf to protect you against the building going bankrupt.".

When that crash hit its bottom.....virtually everything stopped cold in the commercial real estate industry. I personally took huge losses in business income and in investments. The impact on the nation was more severe than if other industries fail. Real estate activity multiplies into hiring tons of people as contractors, specialists, involves transportation, overall purchasing throughout the economy. Tons of people lost all work. About 1 decade after the worst of that period I ran into someone with whom I had been professionally friendly. He had had a thriving specialty architectural firm. When all work stopped he ended up driving a taxi for a couple of years. When we remet in the early 2000's he was busy again as an architect.

While this was going on the tech industry was growing in dramatic if in some ways "under the radar screen". Computing was going through constant evolution from huge computers to corporate mini computers to personal computers. The telecom industry was growing dramatically as a result of the first decade after the elimination of the AT&T monopoly. Software development for the micro computer industry was growing like crazy and networking was growing dramatically.

Very importantly, as S&L's and banks started to fail, the government went through several efforts to shore up the banking industry and keep insured deposits whole. The initial efforts were overwhelmed and a secondary effort became the Resolution Trust Fund. The early days of the Resolution Trust Fund were a disaster of being overwhelmed by both failed financial institutions and an incredible inventory of bankrupt, empty office building and ancillary commercial properties (along with failed residential properties).

While the "official stats" for the recession limit it to a short time period (late 1980's/early 1990's)....the clean up process on savings and loans, banks, and the properties they held....pretty much took slightly more than a decade (mid 1980's to mid 1990's).

I mention all this, because so many of the elements of this recessionary period are similar to the period of the late 1980's/early 1990's.

Even if govt stats are being presented in a way different in the past, so as to show overall GDP growth during the most recent quarters there is still significant robust economic activity going on in certain sectors of the economy. On a micro level I follow one sector and I regularly see reports of small new businesses getting financings from venture funds for anywhere from hundreds of thousands to financings in 8 figures ($10-99 millions). I see these financings continue through the first half of this year.

Nobody of credibility or strong beleivability was able to foresee the incredible run up of fuel, food, and commodity prices that have occurred during the first half of '08. Nobody of credibility is predicting exactly where inflation will go over the remainder of the year. (the inflationary impact of fuel, food, and commodities is world wide--it is not an American only phenomena)

Unfortunately, the run up in costs pretty much sucked much of the value of tax rebates from many people.

One of the few bright lights I see out of this horrendous economy is that residential real estate values are taking enormous tumbles. There has been lots of commentary, some studies, etc. that suggest that residential housing pricing had bypassed the ability of middle income Americans to buy, and buy up in the housing market. At some point when the dust settles, those with jobs in the thriving or strong parts of the economy, will have good shots at value purchases within the residential markets.

 

The Austrians including Paul did. They also predicted the end of Bretton Woods, the Great Depression and the fall of the Soviet Union and eastern European socialism to economic collapse.

Investors include Peter Schiff, who is a big time TV consultant and foreign investor, as well as Jim Rogers, former partner of George Soros @ the Quantum Fund.

The problem you have, is that you don't believe anyone of credibility or believability, and you don't appreciate basic market fundamentals. That is why you are getting hosed.



I have been posting about the crisis in '08 since late last year on this forum, and you have constantly derided me about it.

I was right. You were wrong.

Wrong. Schiff documented this almost precisely in his 2006 book, Crash Proof.

The problem you have, is that you continue to disassociate inflation with monetary policy. This is why you see inflation as rising prices (apparently what goes up never comes down in your world), and not as an increase in the aggregate of money vs. stagnant or shrinking economic activity.

 

Guess I'm not credible. Sept. 22, 2007:

Serious Risk of Inflation and Currency Devaluation

those dollars are coming down at a steady pace whether or not housing rebounds. In the worst case scenario housing prices will stay soft while the dollar's fall accelerates. Although loans would be "theoretically cheap" because of the low interest rates, any further borrowing would be at high risk for default because of the rapidly shrinking real value of our American assets. Basically, with pressure on both sides of real estate, there won't be much equity left to lend.​

You want to know where its going? $6 gas by the end of the year. Merry Christmas.