Tuesday, February 10, 2009

Bill Bonner on the Stimulus

In this morning’s paper is a front-page article describing how Japan “wasted trillions” on its various stimulus programs...

Public spending was so aggressive, it boosted Japan’s government debt to 180% of GDP – more than two times the current U.S. level. But did all that cement buy Japan out of its slump?

You be the judge. Housing prices in Japan are now back down to where they were in 1975 – nearly 90% below the late-’80s peak. And stocks? The Nikkei index is back down to where it was a quarter century ago. Stocks sell for half their book value – and they’re still considered too expensive for beaten-down, hyper-fearful Japanese investors. The downturn began in 1990. Over the following 19 years, it did more property damage than the Great Tokyo Fire of ’23 and the Enola Gay combined, wiping out wealth equal to three times the country’s GDP. This was despite interest rates at zero…and a heroic effort at Keynesian stimulation.


Wait a minute. The feds are on the case…but haven’t they been on the case for the last 18 months…ever since Bear Stearns went broke? And wasn’t Tim Geithner right there in the room when they decided to let Lehman Bros. go broke…while saving AIG?

Albert Einstein: “Never expect the people who caused a problem to solve it.”

And aren’t the feds’ new plans to save the economy little different from their last plans? Bailouts, stimulus, tax breaks, new, looser credit…aren’t these the same things that were used not only for the last 18 months…but in the Great Depression in the ’30s…and in Japan in the ’90s? Have they ever worked? Nope. Never....

“So, what’s the solution?” asked a colleague this morning, after we explained why the stimulus programs cannot work.

“The solution to a depression is a depression,” we replied.

read the entire article

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