The Stimulus Is Definitely Working?! - Forbes.com.
Excellent commentary on the current arguments for and against the true effect of the stimulus on the current state of the economy. At best, one can claim a "placebo" effect (borrowing on Romer's use of medical terminology) on the economy. Essentially, things are getting better because participants believe things are getting better, not because they actually are yet. Participants believe they've been given a medicinal cure and that cure has made them better, when, in reality, the illness has or is simply running its course without any benefit from the placebo. So little of the stimulus has actually entered the economy that it's nearly impossible to claim it's materially driven the nascent recovery.
I continue to believe the stimulus will prove inflationary as it increases money supply just as the economy truly gains momentum in the later half of 2010 or early 2011. The recently announced increased in the expected deficit is also cause for concern. It seems probable that the dollar will weaken as global participants consider safer havens elsewhere. Also keep in mind, many of suggested a deliberately weakened dollar as a method of "inflating" the economy.
Bottom line - it's highly unlikely the stimulus has had any material impact yet on the economy, good or bad, but will likely have a big impact in the next 18 months to 2 years and it's more likely that impact will not be beneficial.
Excellent commentary on the current arguments for and against the true effect of the stimulus on the current state of the economy. At best, one can claim a "placebo" effect (borrowing on Romer's use of medical terminology) on the economy. Essentially, things are getting better because participants believe things are getting better, not because they actually are yet. Participants believe they've been given a medicinal cure and that cure has made them better, when, in reality, the illness has or is simply running its course without any benefit from the placebo. So little of the stimulus has actually entered the economy that it's nearly impossible to claim it's materially driven the nascent recovery.
I continue to believe the stimulus will prove inflationary as it increases money supply just as the economy truly gains momentum in the later half of 2010 or early 2011. The recently announced increased in the expected deficit is also cause for concern. It seems probable that the dollar will weaken as global participants consider safer havens elsewhere. Also keep in mind, many of suggested a deliberately weakened dollar as a method of "inflating" the economy.
Bottom line - it's highly unlikely the stimulus has had any material impact yet on the economy, good or bad, but will likely have a big impact in the next 18 months to 2 years and it's more likely that impact will not be beneficial.
