As you can see in the second blue club from the right, most of our GDP growth in the fourth quarter originated from restocking inventories. In other words, in early 2009 when businesses were worried of the future, they just sold off their inventories instead of actually producing new goods.
That’s why the result dropped then therefore many individuals were thrown out of work (you don’t need that many employees just to sell off inventory). Pretty soon, the inventories are spending down and have to be replenished – that’s what occurred in the fourth quarter. That is still very good – it puts visitors to work – but as Gordon notes still, it’s a very unbalanced way to grow.
What happens in mid 2010 when the inventories are restocked but demand continues to be tepid? A double-dip recession, that’s what. There’s been a lot of talk recently about a double-dip recession and this is the reason why (this and the fact that the fiscal stimulus that will exist will begin to peter out then).
A stronger stimulus could balance this growth and generate a virtuous cycle of self-sustaining growth. If some infrastructure was acquired by us or public works projects, money would go into the hands of employees (consumption) and business (investment) for real purchases that they have choices for and place value on. Right now that isn’t what we’re spending on – people doing the spending right now are store owners who are replenishing their shelves, not business making new machines or households buying new goods.
Just store owners stocking bare cabinets. That’s fine, but no one seems to be buying anything off those cabinets, just what exactly happens next? In the center of all the are the claims – specifically the states’ ridiculous proclivity for balanced finances and aversion to borrowing. That is literally a nineteenth century budgeting perspective transposed onto fifty sovereign governments that define the early 21st century’s singular superpower. It’s absolutely shameful. What’s even more shameful is that I think we’re generally oblivious to the.
We’re going to be judging how macroeconomic policy fared without even offering the state’s another thought, and each one of these budget troubles at the state level are only going to encourage state governments to become more tight-fisted in the foreseeable future. What they should be doing is recognizing that there is no point in having a AAA bond ranking if you impose borrowing limitations on yourself.
- 5 of 10
- 26 billion (July 2000)
- Industry generalist
- Bid Premium Auctions
- Sure apartments pay rent, buy in addition they get old, sometimes depreciate etc
The market will impose that limit you. If the marketplace is beginning to get anxious about the soundness of finances, your relationship rating shall slip, the interest you need to pay will increase or both. From taking an accountable Much, market-oriented approach, condition governments are willfully disregarding market signals, credit market signals specifically.
This is my prediction for the near future: that people will be talking past one another very, very soon. Soon the inventory routine will run its development and course will stall again. Unemployment might even again increase, and people are going to be blaming the Obama administration for his or her big-spending ways. State governors are going to make stump speeches in the fall for Republican candidates declaring how they tightened their belts through all this while Washington acted irresponsibly, therefore the Democrats must go.