Tuesday, February 10, 2009

Stimulus May Fail to Revive U.S. Growth Without Recovery in Banking System

As usual, the media and pundits have it backward. Lending is pro-cyclical (as is the health of the banking system in general). The stimulus will help the bank rescue plan to succeed, not the other way around.

Read story here.


googleheim said...

No one points out that China's holding of our debt is really a way they wish to hold their savings outside China.

Many Japanese keep their money out of Japan namely (historically) recently to keep it from deflating as with the lost decade. ONLY until the last dollar run in October did they have problems since the Yen appreciated along with the dollar.

Why would China save in Yuan when they are simultaneously devaluing the Yuan on purpose to export so they can in turn profit again by investing where the interest rates are higher ???

So if people complain about China seeking a better return and safety of their savings, they also have to complain about Japan and UK.

googleheim said...

If Americans would have saved more in bonds and done the Frischberg, then they would have done something patriotic.

However, someone else like China picked up the investment.

It is the fault of all Americans to not have invested in the bonds in the first place.