Do big govt programs get economies out of trouble?

Mish has another good comment on the economy, as seen through the eyes of investment advisor experts. “[Barton] Biggs is proposing the same medicine Japan tried. Where did it leave Japan? After 20 years of infrastructure projects, Japan has government debt to the tune of 200% of GDP and is still mired in deflation.”

That medicine is defended, with some embarrassment, by a couple of economists at the St. Louis Fed, in the formerly respected publication, “The Regional Economist,” described on their contents page as being “published by the Research and Public Affairs departments of the Federal Reserve Bank of St. Louis.”

Entitled, A Closer Look, the January 2011 article looks at government “aid extended to companies, agencies and individuals by the Treasury, the Fed and the FDIC.” They conclude, surprise (!) that it was necessary and could return a profit to taxpayers.

Government officials and their lackeys, the financial press, spent the subsequent six months explaining what a great deal it was. And please, call it “assistance,” not “bailout!” They assert that the aid must be “wisely-administered,” and thereby throw their whole carefully-balanced argument out the door. In spite of the public believing that trillions of dollars have been thrown away, they say,

…the assistance programs of the Federal Reserve and FDIC have earned significant profits, and the Treasury’s programs—except for those related directly to the housing markets—are projected to incur no more than small losses. Significant losses, as we discuss later, are confined to the federal housing government-sponsored enterprises (Fannie Mae and Freddie Mac) and to the efforts to assist individual mortgage holders threatened with foreclosure.

You decide - figures from St. Louis Fed

This is a great deal??? You do the math – good for taxpayers, or not?

Let’s give the last word to Mish, commenting on Biggs, et al., on whether massive bailouts are good for an economy: “If printing money solved problems, Zimbabwe would be the wealthiest nation on the planet.”


About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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