Possibly the most level-headed post here in months.
"Armageddon type folks are usually wrong."
Usually. When we see some doomster on a street with a sign saying "Repent! The end is near!" we're presented with an unprovable, but irrefutable statement.
Maybe it's true, maybe it's not. But we keep going.
You summarize major risks nicely; if monetary policy succeeds, there will still be drags on the economic rebound for the US: mostly, debt. In theory, these can be addressed over time, as the economy is adjusted for efficiency (energy independence, infrastructure improvement, rationalizing health care, reinvigoration of manufacturing, and so on).
The new administration has leaned towards pragmatism, and respect for longstanding institutions at the same time as an impressive list of changes begins. These efforts may fail because of declining inflows (i.e., lack of confidence), failure of monetary policy, or some combination of both.
Last year, looking at Bernanke's aggressive moves (despite some initial confusion and mis-steps) I had the thought that if they succeed, they will become the "textbook" response to such crises. He may emerge as a goat, or a hero. As posted then, there's no doubt that scholars will be presenting papers on this 100 years from now. We're living through a historic event.
Commentators on debt, many of whom deserve enormous respect, have said "It's axiomatic that the cause of a problem can't be the solution to a problem ."
Not necessarily... you can fight fire with fire.
But confidence is vital. If the international community loses faith in US's ability to transcend its predicament, there will be frightening consequences for the US, and the global economy.
So now, monetary policy and confidence in the US is being tested. Only time will resolve the questions and risks.
Meanwhile, I'll watch the parade of doomsters -g-
Jim |
