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Stimulus Revisited

The more I think about all the stimuli that is being shoveled out by various governments across the world, the more I realize that we are where we are because of the loose regulation of the last decade or so, more so in the last 4 – 5 years. What has happened in the last 4 – 5 years was in fact a super stimulus package, handed out over a long period of time – even though it may have not been called that.

Governments across the globe – specifically the US and the UK ended up over stimulating their economies over the last 4 – 5 years resulting in a crash. They provided jet propulsion fuel, encouraging people to race their regular cars, heading into a huge multi-car pile-up – and now how do they propose to clean up the mess? By providing even more potent fuel in even higher quantities!!!

In my view, this is happening because at the core, all politicians including Obama are selfish people – and want to protect and promote their self interest above all else. Their immediate concern is to protect their term in the office, even if it means worse prospects in general in the longer term.

There are two ways to deal with a drug addict who is sobering up – to help him recover or to give him the next shot (or snort) and mellow him down again.

To help him recover is harder and more painful for both the addict as well as the person helping the addict.

To give him the next shot is definately easier for the ‘helper’, but will worsen the addicts condition. The governments across the globe seem prefer handing out the next pill, shot, snort – not because it is smart, but because it is easier for them to do so – resulting in a dreamier, hazier today, but what is bound to be a worse tomorrow.

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Stimulus

Imagine an extended stay with a thousand residents. The ‘all you can eat’ buffet at the extended stay is amazing. The spread is lavish, and the taste is unbeatable.

The thousand people staying there binge at breakfast, lunch and dinner. Also, between the meals, there are unlimited snacking options.

This goes on for several months, and then finally the residents start developing all sorts of health issues – obesity, upset stomach, acidity and diarrhea.

They start cutting down on their food intake. The kitchen staff start to worry. They wonder why the food intake has dropped so dramatically.

To counter this, they announce a “stimulus package” – a wider spread, tastier food at a lesser price!

Do you think that will help solve the problem? Will the residents “bite”? And if they do, will it help them with their health issues?

The same is the situation with all the stimulus packages that the various governments across the globe have been announcing. The problems created by cheap and easy credit cannot be solved by easier and still cheaper credit.

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