Grant's latest makes an interesting point: despite the fact that the decline in GDP is comparable to many other recessions, the fiscal and monetary response has been disproportionate, even if one considers the Depression which saw only a 3.4% and 4.9% monetary and fiscal stimulus despite a 27% decline in GDP from peak to trough.
So far, the monetary and fiscal stimulus totals 29.9% (18% and 11.9% respectively) while the GDP decline is 1.8%.
He shows an increasingly active response to declines in growth, with the relatively benign '01 decline getting a whopping total of 7.2% stimulus.
In response, I'd say that this isn't Grant's best because the GDP decline is not over. From a purely logical standpoint, he really shouldn't conclude anything yet. Nonetheless, his point is good despite the faulty logic because a 27% boost is extraordinary under any set of conceivable circumstances short of Armaggedon.
The stats don't really take into account the total to banks trying to avoid derivative meltdown. That is a serious chunk of the total stimulus. Derivatives didn't exist in the days when fiscal and monetary boosts were not quite so, ah, aggressive.
I still think that if we net out the moolah to banks, we still get a very historically generous response.
So what is Grant's point? I suppose the net-net is that all of this proves how worthless fiat currency ultimately becomes. Also, that debt sucks.
The most interesting conclusion, to me, is what do we do when the next decline hits? Have we set a precedent for the future?
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