Goldman: A Slowdown Now Would Be Deadly, Given That Governments Are Out Of Ammo

The Business Insider ^ | 6-11-2010 | Vincent Fernando, CFA

[blam]

Goldman: A Slowdown Now Would Be Deadly, Given That Governments Are Out Of Ammo

Vincent Fernando, CFA
Jun. 11, 2010

Here's a reminder that governments, in addition to the U.S., have really pushed the limits of stimulus.

Developed nations (The OECD) collectively have slashed their interest rates pretty close to zero as shown in the chart below, on the left. They've also let loose the spigot of government-provided liquidity as show on the right-hand side, below.

They've exhausted the majority of their recession-fighting ammo.

Goldman:

Policy options limited if more stimulus is needed. Policy is much easier than it was in 2008/2009, inflation constraints are smaller and we have not seen a meaningful tightening cycle in most places. But the flipside is that the options for fresh stimulus if the cycle slows again are severely constrained. Fiscal policy is already being used to its limits in many places and conventional monetary policy is already fully employed in much of the G10, and so only unconventional measures (QE) are left in the event of a renewed downturn. This is why many policymakers have been so reticent to withdraw stimulus quickly, but it means that a renewed slowing in growth, either as a consequence of more pressure for fiscal adjustment or otherwise, could be much more dangerous.

(Via Goldman Sachs,Comparing the Sovereign Crisis and the Mortgage Crisis, Jim O'Neill, 9 June 2010)

[snip]

[Oceander]

Here comes the once-mythical double-dip recession. Funny how those things only seem to crop up when we have democrats/liberals in charge of both Congress and the Whitehouse.

[FlingWingFlyer]

One man’s “ammo” is another man’s TAXES!

[mike_9958]

This is how revolution may work.... consumers and business shutdown and starve the governments of needed funds....cool.

I hope it works.

[coloradan]

Except that they then print money. Which devalues it and makes all your investments go up. They then tax you on your “capital gains,” notwithstanding that those investments didn’t necessarily go up in terms of wealth, just in nominal dollar terms as a result of the devaluation they themselves caused. Nice work, if you can get it. Makes me think of lamp posts, though.

[Jim Robinson]

Idiots. Just cut the spending. Cut the government. Cut the taxes. Get the government out of the way and set our people free to produce. Works every time.

[oyez]

When they make “tax” a dirty word like they have made out “profit” to be, we have a chance.

[Señor Zorro]

This is how revolution may work.... consumers and business shutdown and starve the governments of needed funds....cool.

In response, the government prints the money it needs to meet its requirements. This results in hyperinflation, which wipes out the middle class, and sends the country even deeper into depression. Let's face it, this is a no-win. The only way out is to step away from the ledge.

The problem is that the ideas that led us to this point (Keynesian economics, the welfare state, government run education, etc.) are so deeply ingrained in the populace's mind that most are simply unwilling to take the necessary steps. In all likelihood, things will get a lot worse before and if they get better.

[perfect_rovian_storm]

Well said, except it makes me think of yardarms rather than lampposts. Same people swinging from them though.

[Candor7]

They've exhausted the majority of their recession-fighting ammo. >>>>>>>>>>>>>>>>>>>..

Now finaly, market forces will take over!

[Hugin]

As Margaret Thatcher put it, the problem with socialism is eventually you run out of other people’s money.

[Buddy B]

Bookmarked .....

[ExSES]

While Roosevelt is revered by the dims..., at least he recognized the need to reduce federal spending in some areas!!! Now, there is NO shared sacrifice by the federal bureaucracy contemplated!!!

The New Deal introduced acts that became part of the law and numerous agencies that worked with the Federal government in ensuring that the acts were enacted.

On March 15th 1933, Roosevelt asked Congress to pass the Economy Act. This cut the pay of everybody who worked for the government and the armed forces by 15%. Government departmental spending was also cut by 25%. The saved money, about $1 billion, was to go towards financing his New Deal.

[The Magical Mischief Tour]

[pallis]

Deadly or not, it’s coming.

[hinckley buzzard]

As predicted by the Austrian School, there has never been an easy way out of the credit bubble. Trying to pretend otherwise has been criminal malfeasance by government hacks from George Bush and Henry Paulson through the whole Obama farce. Trillions of dollars have literally disappeared, and to no effect. Now what? Do what should have been done since 2008-- Nothing. Let the inevitable happen--and better sooner than later even at this late date.

[Bean Counter]

The real pisser in all of this is once it is clear that the system is crashing, the Congress Critters who brought down the house will simply “retire” and never, ever face any accountability for what is surely coming.

[dalereed]

“The saved money, about $1 billion, was to go towards financing his New Deal.”

His New Deal delayed the depression until 1941 when he negotiated the attack of Pearl Harbor to get us into WW-2 and end the depression.

[blam]

"...the Congress Critters who brought down the house will simply “retire” and never, ever face any accountability for what is surely coming."

That's why I'm telling everyone to find out where your elected royals and union officials live, even the retired ones...when TSHTF, they'll be the ones with the goodies...you can go 'stay' with them until things get better.(Ahem)

[saintgermaine]

This workes with sensible people but there are very few left in our government.