Sunday, November 30, 2008

Solid Economic Advice for these Troubled Times

In my quest to understand the current financial crisis, and the wisdom of our current government's policy of not running deficits and its consequent reluctance to provide a stimulus package, I decided to turn to the experts on the internet. Here is the best of what I could find.

First, a quote from the Number 2 economist of the Number 1 bank in Canada [1]

"' I think a lot of us were a bit flabbergasted by the government’s priorities,' said Douglas Porter, deputy chief economist at BMO Capital Markets. 'Who exactly are they trying to impress' with the deficit-fighting rhetoric? he asked, since Canadians know very well that temporary deficits are far preferable to a deepening recession." (Courtesy of Paul Wells)

Second, a quote from the Number 1 economist of the Number 2 bank in Canada [2]

" 'I'm not a big fan of short-term stimulus packages,' said Don Drummond, chief economist at TD Bank. 'They don't really generate very much short-term stimulus and they very quickly become long-term structural problems.' " (Canadian Press)

There you have it. One expert arguing broadly against the current governments practices. Another broadly supportive. Thanks for the help guys.

I've searched a bit for other evidence either for or against stimulus packages, and haven't come up with anything better than the above two quotes. The next best argument that I've heard is, more or less, "but everyone else is doing it!" I doubt there are too many of us who didn't try using that one to defend our actions at some point in our lives. When we were in grade three [3]. I remember somebody asking me something about my friends and a cliff. On the other hand, if you compare some of the major stock indices, over the last year or so, it seems like we've already followed our friends off a cliff.

[1] Number 1 by assets and in market capitalization

[2] Number 2 by assets and in market capitalization

[3] Well I was in grade three when I first tried to use it. The truth is, I wasn't actually defending myself. I was hoping to bring my friends down with me. The truth is, they weren't actually my friends.

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