Wednesday, August 25, 2010

Goldman Sachs (NYSE:GS) Says More Fed Stimulus Coming

According to Chief U.S. Economist at Goldman Sachs Jan Hatzius, the Federal Reserve will attempt to stimulate the economy as it continues to show it weakness.

Unsurprisingly, sales of previously owned homes in the U.S. in July, plunged to their lowest level in fifteen years, with a record drop of 27.2 percent. That works out to 3.83 million units sold annually.

June sales were downwardly revised to a 5.26 million-unit pace.

As a result, Hatzius said, “The Fed will eventually move to additional monetary stimulus via asset purchases or other unconventional measures.”

Probably one of most incredible statements made economically, is the casual assertion on what the figure should be. Hatzius concluded, “The Fed will eventually move to additional monetary stimulus via asset purchases or other unconventional measures.” In his mind, there is “no point in doing anything less than” $1 trillion.

Just a casual reference to throwing another $1 trillion of money the government doesn't own for taxpayers to have to pay in the future?

If the prior approximate $1 trillion didn't do anything, how will throwing another $1 trillion at the problem work? It won't, but it'll bring America all the closer to economic collapse than it already is.

It's no different than giving booze to an alcoholic to solve his problem. An addict can't be freed from addiction by imbibing more alcohol.

The outrageous hiring of more government workers and paying all those government employees over double what the private market makes is criminal. After all, who do you think ultimately pays for these high wages? Those who are productive.

How does the idea of adding stimulus play out within those parameters?

We must understand that the government can create nothing as far as wealth and productivity go. So when they spend, they're either taking from existing productive workers or from the productivity of future generations, which will in no way be able to pay back the spending excesses of this administration.

There will be a stimulus for sure, as the Federal Reserve has already stated they're ready to intercede again if the economy continues to weaken.

They must do that because the reasons behind their failure will be exposed, which is stimulus doesn't work, and only robs from the people of the country doing the stimulating.

If a trillion dollars hasn't already exposed that to you, I don't know how you'll ever be convinced until the word depression replaces the word recession as far as the reality we're all experiencing.

We're still in a recession, and the reason that's so is the GDP includes stimulus spending by the government, which is like taking a loan out and using it to buy stuff which produces nothing but consumption, but nothing in the business sector which will help in a sustainable manner.

The inclusion of stimulus in the GDP hides and masks this reality, the reason we hear people say the so-called recovery is slowing, when all it is is returning to its original condition before the stimulus.

Hatzius adds more bleakness to the economic scenario, saying unemployment will increase to 10 percent in 2011, up from the 9.5 percent now.

That seems to say the stimulus will be worthless, which would be true. It's best to let the market take care of these things, as it's much more efficient and will allocate financial resources to areas which will do the most good. Stimulus money doesn't do that, as the $1 trillion already spent testifies to.

No comments: