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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: yard_man who wrote (3970)4/8/2004 6:03:42 PM
From: CalculatedRisk  Read Replies (2) of 116555
 
IMO, the fiscal stimulus that we have seen has been misdirected.

One of the imbalances occurring right now is we have BOTH an excess of capital AND an excess of debt. How can this be? The reason is the skewed distribution of wealth (the highest GINI coefficient since '29). Some people have an excess of capital; others an excess of debt.

The best growth occurs when: 1) wealth is fairly evenly distributed (fairly obvious why) and 2) incentives exist to distort that distribution (to motivate people to work hard). Fiscal policy needs to balance these two elements.

The current fiscal policy is exacerbating this distribution problem. My proposal was:
1) tighten credit requirements.
2) repeal misdirected fiscal policy (repeal tax cuts),
3) slowly tighten monetary policy to slow the growth of debt.
4) Redirect fiscal policy to stimulate demand and/or cushion Americans from high unemployment.
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