Thursday 23 July 2009

Don't stop stimulating us!

Everybody knows by now that the recession is over. The Bank of Canada said so, therefore it is so.

That wasn't so bad, was it?

It's amazing how fast that fiscal stimulus works. Why, just a couple months ago the government was throwing promises of money around at anybody with a shovel, and Blammo! Recession over! We gave money to stadiums that have yet to be built, we announced funding for sewers and fire stations and public transit, and we also gave money to festivals that would have gone ahead with or without the extra cash. Yet, even though the money has barely started to flow, the economy has turned around and is heading back up hill.

You might think that maybe this fiscal stimulus thingy doesn't really deserve any credit for the pending recovery. Maybe recessions go through a natural cycle to recovery, and maybe the record-low interest rates set by the central bank helped to get money flowing again. Maybe this Keynesian stimulus is just a bogus pile of crap designed to make it look like the government has some control over the situation.

You might think that, but you would be wrong. You see, the Economic Policy Division of Anybody-Want-A-Peanut? knows that the recession ended so quickly, not because money was spent, but because people think money is being spent. Just like golf, or the voices that tell me to strangle dogs, it's all in the head. Money for this, money for that: it is a subliminal message to consumers that money is flowing and good times are around the corner, and it becomes a self-fulfilling prophecy.

So then you might think, now that we have the ball rolling in the right direction, why don't we just cancel any additional stimulus spending to minimize the pain of future deficit reduction? No can do. We need to follow-through, because if we don't, people will begin to realize that the act of the government spending money in and of itself doesn't cure a recession, and so the future scam, er, strategy will not be effective. Job growth returns with a lag, so it should correspond nicely with the actual spending of the money, and so people will continue to believe that it works. And as long as they believe it will work, it will work. It is essential that we don't break that belief system. In fact, I really shouldn't be writing this post, but my readership is low enough that I don't think it will cripple the economic future of the country. Just don't tell anybody about this, okay?


Scott MacNeil said...


Excellent post. However, as you suggest I for one will ensure I tell nobody about the truth behind the stimulus and our bogus belief systems... Mum's the word!

cherenkov said...

Thanks. I know I can count on you, FA.

Manitoba News said...

great post , but we are going into a massive slump in housing prices...just you wait.

cherenkov said...

Why do you say that? There has already been a correction in housing prices.

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