Cafeful what you wish for!

I wish I had an answer. All I can say is that if history repeats itself, real estate should be a good buy for the long term. As inflation increases rents, the property should bring a positive cashflow. Real property is also a great hedge on inflation. Of course, this doesn't neccesarily hold true for commercial real estate. On the downside for real estate are possible capital gain tax increases, property tax increases and rent control.

In two years inflation is going to go through the roof. I hope we have that long.

 

Starting in the early 1990's Japan, the world's 2nd largest economy, tried stimulus to spark its economy, which went into the pits toward the end of the 1980's.

Here is an article commenting and analyzing the impact.

http://www.nytimes.com/2009/02/06/world/asia/06japan.html?_r=1&pagewanted=2

The stimulus efforts didn't work real well. The economy stayed stagnant for over a decade. (hm...possibly stagnant...but it remained the world's 2nd largest economy while growing at a teeny rate).

There is a lot of debate to this day about the Japanese efforts. Some say it didn't work well. Some say not enough was done fast enough to really jack up the economy....the argument being that it should be sort of "shock and awe" with huge bucks spent quickly. Of importance Geithner is of that school.

Meanwhile long term analysis of the Japanese experiment showed these measured results:

Japan spent like crazy on infrastructure. It went overboard. The current US approach doesn't get close to even the teeniest iota of what Japan did with infrastructure. Of interest the Japanese built a bunch of "bridges to nowhere" and other projects....that seem to have been a total waste....and of course added to Japanese government federal debt.

Meanwhile on a direct basis, not unlike the idea of giving every mortgage holder money....this proposal was in an editorial written by a small business owner from Seattle

http://www.washingtonpost.com/wp-dy.../02/06/AR2009020603195.html?hpid=opinionsbox1

He suggests sending a gift debit card equal to $2000 to every tax payer in the US. At 80% redemtion rate he estimates the cost at $270 billion. I've seen that kind of proposal before.

He also decries the idea of further small business tax cuts...as being something that wouldn't help today. He suggests that unlike the rebate checks these would have to be spent...thereby being more directly stimulative.

 

There are big differences between Japan and the US.

Japanese workers save around 25% of their salaries and Japanese have $5 trilion in personal savings. Japan also has a trade surplus.

Americans over consume and a have a negative savings rate. The US has a $800 billion trade defecit and is $12 trillion in debt.

 

Both those are eminently true. Regardless, those who are focusing on economy and may be involved in either directly dealing with it and/or stuying and critiquing what the administration does will be looking at the Japanese model and experience.

That article further points that Geithner directly studied that experience. He is of the opinion that Japanese should have poured more money more quickly into their economy.

After reading the article I developed a different perspective....that attempts at stimulus should really be focused on getting the most return for the buck...not dominated by political perspectives.

 

This is true. What is the point of stimulus if we aren't improving the economy?

I like to see the waste trimmed from Federal spending and directed to where we should be spending. We don't have leaders say that times are tough. We can't afford to spend on golf courses, neon signs or studying the spotted mouse.

 

I've often asked myself what the point of sex is if I don't get off. Hmm.. The same as the above.

There is absolutely no need for the government to spend money on anything other than the most basic of services right now. The last thing we need to do is spend more money.

Ask anyone that has lost a job if they went out and increased their spending.

What Nancy Reid and Harry Pelosi (yes that was intentional) have orchestrated here is likened to a recently unemployed married family of 4 going out and buying a brand new Lamborghini Gallardo instead of cutting back on spending and looking for new ways to earn money.

Your average 21st century democrat makes my cousin who has down syndrome look like a friggin rocket scientist.

 

The savings rate has increased to 4% but back in the early '80s the rate was 10%.

There's too much spending all around.

 

Too bad the savings rate is not the later today....

 

Give it some time, it will be back up again.