And no I’m not talking about the blockbuster movie that grossed almost half a billion dollars worldwide or the unpleasant feeling that none of us wants to experience, but the mess that many countries are trying to deal with following their stimulus spending spree. Prompt and bold responses from governments worldwide to the unfolding global financial crisis have been praised as they resulted in measures that kept the disaster at bay and the global economy afloat. But today, those measures are raising serious concerns as they will eventually be withdrawn and the effects might be catastrophic.
Whether you stand to say, and I may agree, that programs such as cash for clunkers, housing tax credits, etc have borrowed from future sales and only delayed the problem, we all agree that they helped prevent the worst. However, the issue is not the feasibility of the stimulus bills, but the sustainability and hangover effect the global economy will experience, as they are withdrawn. How important is the timing and coordination of the exit strategies from the stimulus measures? Well, lets just say that if governments withdraw their stimulus too soon, they jeopardize growth. But if they keep their policy loose, there is a risk of both inflation and asset price bubbles.
Below is a chart that shows estimates of the stimulus packages worldwide.
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most of the major investment banks have started to pay back the TARP funds they used, so its a matter of confidence at the time being especially since Q3 results were great and most investors have already exited the market after making up for what they lost post-lehman
what i’m worried about at the time being is china and how transparent they are or when will their bubble burst
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Exactly.. clearly the global outlook is still unclear and most are reluctant to exit the stimulus or raise rates. Investment banks were smart.. they milked the taxpayers and raised capital, used the TARP and paid it back, and are finally enjoying the big bonus checks. How will the US consumer recover? Nobody knows.. interest is near zero but wait where is it going? CHINA! Hot money is flowing into China everyday and the bubble is inevitable and its a only matter of time for it to burst. Whether the Chinese Premier likes it or not..Inflation is kicking in, China’s gonna have to deal with bad loans and the bubble will burst.
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