The news today (6/28/10) says that the G-20 rejected the proposal by Obama and some of the G-20 member countries to expand the stimulus program with more borrowed or printed money. Spokespersons in favor of the stimulus plan are arguing that this will result in an extended recession (or worse) and more unemployment.
O.K. Of course it will cause financial pain to stop throwing new money at the problem.
But what's the alternative? More false prosperity for another year or two or even three years? And with each trillion of new money creation or expanded borrowing, the problem gets worse.
Seems to me it's lot like having to decide whether to submit yourself to chemo therapy treatment for cancer now, rather than having to endure severe surgery later on. In a financial context, it's a lot like individuals who have to choose between cutting up their credit cards now or be faced with bankruptcy a few years later.
Most of us prefer to avoid pain as long as possible, but sometimes, the longer we wait, the worse the pain will be. And in some cases, the result is devastating rather than being merely painful.
Just my two cents.
Vern
www.vernonjacobs.com
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One alternative for the government is to create a period of hyper-inflation
ReplyDeleteand pay off the debt with cheap money.