When the US government creates policy that tries to shape the economy, trillions of dollars can move from certain industries towards others. The problem is that any growth in jobs or GDP based on these policies is bound to be false demand leading to apparent growth -- but both will fall away as soon as the funding stream ends.
Over the last decade, "pro-housing" policies pushed literally trillions of dollars towards the real estate industry. What it created was a huge malinvestment of capital -- overbuilding and overpricing of homes and commercial real estate. The policies created false demand that was not sustainable by the underlying real demand for homes and properties.
Similarly, wherever Uncle Sam points his finger next -- in the form of a nearly $1 trillion stimulus package -- any jobs or 'growth' created will be temporary, and not sustainable. As soon as good ol' Uncle stops footing the bill, those jobs will disappear, the economy will sag again, and we will be looking for our next economic fix.
Why do we continue to turn to various forms of "economic steroids" that create the impression of growth instead of the real thing? .... Their effects cannot last, and every dose weakends the dollar and our nation's ability to grow and succeed in a high-speed global economy.
That's been the problem ever since the Fed would adjust the interest rate to keep us on the growth curve instead of letting the market create a natural downturn. It'll get a whole lot worse before it gets better unfortunately.... Hopefully Ron Paul can get the nomination next time around, he has been predicting this for the past 30 years...
hope all is well Rich!
Posted by: Steve Andrews | February 23, 2009 at 10:54 PM