More Stimulus? Less Growth!
Research for Online Investors

by John Dalt

10/09/09

Will there be another stimulus?  The White House says, “No.”   They are grappling with an economy that is not recovering after all their “focusing like a laser beam” on stimulus plans.  What they cannot admit is that the $792 billion dollar stimulus plan passed in the first days of the administration is not helping the economy, in fact may be hurting by adding more debt.  Talk has centered the last few days around a ‘bounty’ on jobs, paying employers up to $3000 for every new employee.

Basic economics dictates encouraging business to buy capital goods with tax credits. Capital goods purchasing moves inventory, and brings manufacturing jobs back to the economy. From this springboard, the economy will recover. You cannot build an economy on consumers, or retail, manufacturing of capital goods fuels growth. This would be a bitter pill to swallow, but sooner or later the realization of the present “five year plans” will fail, just as they did in the Soviet Union.

The work of writing a daily letter to subscribers is discipline in one's use of words. Have you noticed the latest corruption of English by politicians, everything they do is an “investment.” Investments are not made by governments. Governments spend money, investments are “purchases made for future benefits”, according to the dictionary. Murray N. Rothbard wrote “America’s Great Depression” to explore how government action caused the depression. You can explore it online, and may chose to order a copy to read as I did. On page 20, Mr. Rothbard takes on government investment, “There can be no such investment…since government has seized funds from private individuals…their spending is therefore pure consumption.” I have edited this quote heavily, but the truth is absolute. The next time you hear a pol talk about 'investment', fire him.

Washington is poised to extend unemployment benefits, the homebuyer credit, and other stimulus plans, but they will not call them stimulus plans. The 2010 elections cometh, high unemployment will fuel enough discontent that many encumbents may have to seek new employment.

I am reminded of an old saying from the westerns I watched as a youngster, "Nothing concentrates the mind like a public hanging."  I would add the entertainment value should not be discounted.  It is always satisfying to see the guilty pay for their mistakes.  It places society in order, the guilty are punished.

Today's chart presents the performance of the Dow for the calendar year following the 15 worst calendar year performances of the Dow since 1896. The worst calendar year performance on record for the Dow occurred in 1931. During the following calendar year (1932), the Dow was down 23%. The second worst calendar year performance for the Dow occurred in 1907. During the following calendar year (1908), the Dow was up 46%. The Dow's performance during the 2008 calendar year was the third worst on record. So far in 2009, the Dow is up over 11%. Today's chart illustrates that with the exception of the early 1930s, the Dow has tended to rally following an extremely poor performance during the year prior.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

MarketToday Home Page

Back to Top