The Heart of the Matter for Economic Recovery

UPDATE: HOW US MARKETS REACT, DOW DOWN -381.99 Tuesday

This week President Obama claimed that failure to pass his economic stimulus bill will have 'catastrophic' consequences for the U.S economy. The reality is the catastrophe will be far greater with his plan than without it. If the trends of January and early February of 2009 continue, the rug will be completely pulled out from beneath the U.S. economy, and the full cost of the President's "economic depressant package" will be apparent to all.

If foreign capital does not continue to pour into Treasuries, interest rates and consumer prices in the U.S. will soar. At that point, we will finally be confronted with the real crises that I have long predicted. When the day of reckoning arrives our policy response will be critical. If we continue on the course our new President has mapped out, the catastrophe will far exceed the scope of any he hoped to avoid.

This is Just the Beginning---from Peter Schiff at Seeking Alpha


FORGET STIMULUS, IT'S THE BANK BILL THAT MATTERS MOST

"Unfortunately, it is the bailout package for banks and financial institutions that is the most important. The financial system remains mired in uncertainty. Just the whiff of changes in mark-to-market accounting (rumored midday on Thursday, Feb. 5) pushed the S&P 500 up more than 5% through Friday, while S&P 500 banking stocks moved up 20%.

"The stimulus package is just not that important compared with the plans for the financial sector. In aggregate, government spending does not create jobs. It never has. Total federal government spending increased significantly from 1950 through the early 1980s. But unemployment did not go down, it went up.

------Wesbury and Stein, writing today for Forbes

The real catastrophe happening in Washington right now is that no one---not the president, the Congress and ever Geithner know what's really going on and what to do about it. So they are going to throw tons, TONS, of money, OUR MONEY, at the problem and hope it gets better. Truth is they need to get the banking/financial sectors stabilized and the rest will take care of itself.

A very smart money man told me today that President Obama and company need to hire some smart derivatives guys to help the government sort this all out, adding, "Even hiring criminals who know the complexities of derivatives would be helpful. These people in Washington are politicians who don't have a clue. Not a clue. And having them try to fix this is only going to make it worse."

I couldn't agree more. Depression history proved long ago that too much government intervention only prolonged the economic crisis that began in 1929. So much of what's happening is really just a humongus media event and a convenient way for the liberals to pass its left of left domestic spending policies under the guise of fright and catastrophe. Sadly the cure will prove to be much, much worse than the disease.