Bad Dog

Four Reasons Peter Schiff Is Wrong

I would say that WW2 was the biggest stimulus package in history, and it worked. The problem with most stimulus packages - and this really only refers to deflationary recessions - is that they aren't big enough. The lesson people consistently miss about FDR is that the New Deal was never quite enough to pull the country out of the Depression and in fact 1937, with its lower spending and higher taxes pushed the country right back into the depths, indicating clearly how weak the New Deal actually was. WW2 allowed the US government to open the floodgates. We paid millions of people to build machines with no productive purpose, machines that would be sunk in the Atlantic, shot down over Germany, or otherwise destroyed. We also took thousands of men off production lines and sent them overseas, having them die in many cases after paying a lot for their training and education. We ended the war with a national debt in excess of 120% of GDP. Not content with plunging the country into debt, we then saved western Europe by pouring in money and aid in the vast Marshall Plan, that was then followed by Ike's crazy Interstate Highway Plan. OK, so with all this "unproductive" spending and debt, the USA was ruined for the next generation, right? I mean, that's what the conservatives would have predicted, right? On that basis, I can tell you that the only problem with the stimulus plan is that it's not nearly big enough. I have history and facts on my side.

Now for an important announcement. Brendan, you need a new photo. Your head is cut off. The photo looks balanced, and that smile - dude, not so cheesy, m'kay?


On Feb 23 03:34 PM John Polomny wrote:

> "For one, stimulus packages are a proven way of getting the economy
> out of recession – because Hoover didn’t do it and Reagan did are
> significant reasons why we hold the divergent views we do of those
> presidents.'
>
> Exactly how do stimulus packages produce long term wealth. Especially
> this one. It has very little actual "stimulus" and a whole lot of
> nonsense that amounts to transfer payments to idle non producers.
> I guess if you ram $1 trillion into the economy you can make GDP
> increase for a couple of quarters but this is not real wealth creation.
> Go back and read Henry Hazlitt "Economics in One Lesson" he debunked
> this during the Great Depression.
>
> "The second reason is that the market has actually been pretty stable
> since the November lows. The technical signs are strong and showing
> that we’re in a base building phase that, at some point, will be
> the basis of a bull move."
>
> The market completed a multi decade double top recently on the S&P.
> Earnings estimates are dropping on the S&P and could come in
> at $35 or lower for 2009. Put a generous 15x P/E ratio on it and
> you get around 400 on the S&P if that. put a historical PE of
> 8 for bear market bottoms and you can do the math, its a lot lower
> then here.
>
> "The third reason is one of perspective: We’ve come out of severe
> recessions before. It’s easy to think the game has changed, but history
> says that’s very likely not the case, especially since people were
> predicting doom in each of those recessions, too.'
>
> Yes except this is a depression and the government is doing everything
> it can to iterfere with the market clearing process which will just
> make the situation drag out for longer period of time.
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