Kondratyev
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Letters    by Eric Von Baranov

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Economic Stimlus

We will now hear the Great Depression hashed over again and again and how this happened because and how it could have been avoided. However, monetarists forget one vital factor. An economy only grows when it produces wealth. Debt is orthogonal to the issue of prosperity. If you have a dollar in assets and two dollars of debt with no income debt is too high. If however you are Bill Gates and have $10 million in debt it is probably a credit card bill you over looked and will get to it next month. Such a debt to Bill Gates is not worth mentioning - although for the rest of us it would be devastating.

The monetarist view is the government should dramatically increase debt to keep liquidity in the system. But is this the solution? Will pouring $25 billion into a company with $2 billion is stock value produce wealth. It may defer bankruptcy and keep people off the unemployment rolls, but the cost is the same and the $25 billion will not fix the structural problems of GM or the auto

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Copyright © 1974-2007 Kondratyev Wave Letters by Eric Von Baranov, Sausalito, CA USA