Meredith Whitney doesn't understand fiscal policy impact

Meredith Whitney was on CNBC this morning and was asked if she thought there was a chance that all the fiscal stimulus might actually work. Her response was, “It’s all hodgepodge. The simpler thing to do would be to find a way to get the small players (small banks) to start lending again. And put limits on credit card fees.”

The Citigroup call made Meredith Whitney famous and perhaps even rich, but her response to that simple question about stimulus and its effect on the economy almost guarantees that she will be very late on calling a turnaround. That will be to the detriment of clients at her newly formed advisory firm. Like so many others, she fails to understand, or marginalizes, the impact of government spending on the economy, which at times can be profound.

Bank stocks are rising again. The economy is stabilizing and growth will return at least up until the point where fiscal policy starts to apply drag. That’s not likely for a while.

Read Warren Mosler’s excellent piece on Meredith Whitney.