Paul...thanks for the article...good to know I'm not the only one thinking like this....
The last couple paragraphs really struck me hard....Allan Sinai is representing the kind of ridiculous logic that I railed against....read this again carefully...
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Allen Sinai, president of Decision Economics Inc., also rejects the "take your castor oil" view of recessions.
"There is no question there are serious imbalances that have to be dealt with, but I don't think it requires a recession," Sinai said. "That's a defeatist attitude."
Sinai's prescription: an immediate tax cut of $75 billion to $100 billion to offset the expected increase in household savings and keep Americans living beyond their means, if only for a little while longer.
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Now, clearly, the last paragraph is the author's words (not Sinai's)...but can anyone argue with the author's words? Isn't this scary logic (by Sinai). Give us more money so we can buy more stuff we don't really need (maintain capacity-investment capital- in/for things we won't be able to buy much longer)...to keep us from addressing the real issue (the need for net savings again)...Does Sinai's solution really seem healthy to you (in the long-run?)..Isn't this guy a supposed famous economist?
Also, given the 4 trillion loss in market wealth...(the figure is likely higher now with the dip in the Dow)......Last year, I read several times, that for every dollar gained in stock market wealth, consumers increased their spending 4 cents...if the inverse is true, we are looking at a (at least) $160 billion decrease in consumer spending.....so even with a $75-100 billion dollar tax cut (if, somehow, we could get it immediately).....we will still be short (and there will be a slowdown in consumer spending)....by an estimated $ 60-85 Billion....
These numbers don't take in account the following: (1) Further decreases in Dow or Naz that could lead to a further spending drag (2) "Shock" effect....the market losses occurred faster than the market gains...could this impact the velocity of the slowdown in consumer spending (or the % size of such)...(3) Tax cuts will drain money from Federal government, possibly endanger budget surplus, which jeopardizes current lower interest rates... |
