It appears that the Fed is "out of bullets", and at this point we need fiscal policy (e.g. govt) vs. monetary policy. The Austerians who are trying to run Washington through scare tactics, and who almost had the US default on our obligations, want us to cut spending and reduce our deficit now. My take is this would be better served when the economy has gained its footing and is in a full-on growth mode. We need spending from both the private sector and the government right now. As long as Europe can be contained, the US will not go back to 2008, but we need spending and job growth.
Here's a quote from Barry Ritzholt, which I find is how I feel about the current fiscal policy from our government.
Don't expect a policy response from the Austerians. These misguided politicos are in charge in D.C., despite having gotten the past few economic cycles precisely backwards. During the last expansion (2003-07), instead of raising taxes and cutting spending — managing the deficit, creating a better private/government spending ratio — the hypocritical deficit peacocks in the USA did the exact opposite. We cut taxes during (2) wartime, created yet another entitlement program, and raised yet other government spending during private sector economic expansion.
Here's a quote from Barry Ritzholt, which I find is how I feel about the current fiscal policy from our government.
Don't expect a policy response from the Austerians. These misguided politicos are in charge in D.C., despite having gotten the past few economic cycles precisely backwards. During the last expansion (2003-07), instead of raising taxes and cutting spending — managing the deficit, creating a better private/government spending ratio — the hypocritical deficit peacocks in the USA did the exact opposite. We cut taxes during (2) wartime, created yet another entitlement program, and raised yet other government spending during private sector economic expansion.
That approach makes much more sense in the current environment of consumer de-leveraging, weak private sector job creation, modest capex investment, and low growth. Instead, we suffer from the opposite:
Based upon a fundamental misunderstanding of the works of John Maynard Keynes, they are once again out of phase. Now, the same crowd is looking at raising taxes and reducing government spending when an already frail economy cannot support it.
Excess government stimulus during expansions and austerity during (or immediately after) contractions is simply misguided economics, bad politics and awful policy.
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