I don’t always agree with Tim Iacono at themessthatgreenspanmade.blogspot.com, but his latest post sums up my misgivings about overly aggressive stimulus measures:
After years of spending freely – much of it funded not by income, but by taking on record levels of new debt – consumers are now pulling back.
This makes sense.
But, what doesn’t make sense is when we are told that an enduring economic rebound will require these now-thriftier Americans to “regain their confidence” in a system that has failed them so miserably over the last few years and, during a period of declining incomes and rising unemployment, go out and spend more money.
In this instance, the “victims” of the confidence game are not so much “cheated” out of their money as they are coerced to spend it when doing so works against their best interests – in a few months time, after the thrill of driving a new car has worn off, many “Cash for Clunkers” buyers will wish they could swap their monthly car payment for their old clunker.
Of course I still tell myself that buying a big house isn’t consumption … it’s a long-term investment, a hedge against inflation, a once-in-a-lifetime opportunity, a chance to build equity and join the Ownership Society, and so on and so forth.
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