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-- Posted Friday, 30 January 2009 | Digg This Article | Source: GoldSeek.com

Rick’s Picks

Friday, January 30, 2009

“Phenomenally accurate forecasts”

We weren’t trying to be unkind when we wrote here yesterday that Obama’s $825 billion stimulus plan didn’t have a prayer of succeeding. We wish our new President all possible success, really, but our good feelings stop short of believing that he can cure a credit bust with galactic new quantities of public borrowing.  Yeah, right, Keynes said it could be done. But with all the critical scrutiny that that Keynes’ misconceived ideas have been attracting lately, even neo-Fabian hacks like Paul Krugman may eventually be forced to concede that fiscal stimulus failed miserably in its goal of lifting the U.S. from the economic mire of the 1930s. Another crackpot notion about that era that long ago wilted under the light of truth is that the Fed turned the 1929 Crash into a Depression by tightening credit.  The statistical record says the opposite is true – that the Fed eased frantically, to no avail.

The only popular theory about the causes of the crash that still holds up is that the Smoot-Hawley tariff was the straw that broke the camel’s back. For sure. But is the lesson still so pungent that a Democratic Congress will champion free trade, as it absolutely must? We shall see. But one is hardly reassured by the Cyclopean dimensions of Obama’s stimulus sausage. In purely economic terms, the effort is doomed simply because it will borrow vast sums of capital for purposes that cannot possibly improve the economy other than superficially. 

Just how superficially beggars belief. We had initially taken Obama at his word, that there was plenty of stimulus in this bill for business and capital investment. In fact, to describe this mephitic heap of political rejectamenta as a legislative sausage is to slander the meat-packing industry. The stimulus is mostly a huge expansion of transfer payments to what The Wall Street Journal labeled a “40-Year Wish List” of Federal programs. Here’s a partial accounting: $81 billion for Medicaid; $36 billion for expanded unemployment benefits; $20 billion for food stamps; $83 billion for the earned income credit for people who don’t pay taxes;  and $54 billion for programs that the OMB has criticized as “ineffective.”  And there’s the “little” stuff: $6 billion for mass transit; $8 billion for renewable energy;  $600 million for the government to buy new cars, adding to an existing $3 billion budget for a fleet of 600,000; and $7 billion for modernizing federal buildings and facilities. It goes on and on.

See anything in there for you?  We didn’t think so. But consider yourself lucky if you are not on the taxpaying end of it.  If Americans were to look at these huge outlays as an investment in the nation’s future, many who are destined to pay for it would be horrified by the details.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Friday, 30 January 2009 | Digg This Article | Source: GoldSeek.com

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