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Push the Panic Button?
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Paul Krugman in today’s New York Times spelled out the argument for deficit spending during an economic recession and accused his opponents of “fear-mongering.” He compared the present misinformation campaign to the buildup to the Iraq War.
Deficit spending is what was preached by Lord Keynes and practiced by FDR and lots of awful European Fascists. Deficits are not of the left or the right despite U.S. perceptions to the contrary. All you need to do is recall George W. Bush’s taste for red ink.
I know hawks are not going to listen to me or a Nobel-prize winner if they want to attack Obama over the deficit. (My Washington DC cousin Ralph this morning said some of his neighbors are even blaming Obama for its blizzard.)
Here’s another opinion balanced-budgeteers can also scorn, since it comes from Dominique Strauss-Kahn, the Frenchman who currently heads the International Monetary Fund (suffering the blizzard and also a ban on extramarital sex which does not apply to cousin Ralph, a bachelor.) The sex ban may be why S-K plans to resign early and re-enter French politics (as a Socialist). Anyway, you can also discount what he has to say on many grounds.
But I think Strauss-Kahn makes sense stating that if stimulus is removed too soon and it has to be resumed after a gap the world economy will suffer more than if it is removed a bit too late. Deficits are the least of our worries now.
US markets fell because of concern about the eventual deficit when the economy revives; worry that the economy will not revive because unemployment remains high and there will be more housing busts. Either the first reason for panic or the second pair suffers from incompatibity with the others. That lack of logic marks a panic.
Meanwhile the Euro is collapsing as foreigners seeking a haven put their money into U.S. Treasury bills to finance our deficit at miniscule rates of return. If these inflows keep up the US deficit will be easy to finance.
The panic selloff was so severe that normally I would advise going in with cash and buying. However, it is Friday, never a good day for stock markets with the prospect of a weekend ahead. Two statistical experts (whom I will forebear naming) say that yesterday was respectively “an overreaction” and “an outside move” on charts. They share their newsletters to get mine and will remain nameless.
*Yesterday afternoon paid subscribers received an update on a new stock.
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