Prolonging the Agony
In order to deal with the effects of the “recession” …
• … Britain announced, on January 19th, a second massive bank bailout;
• … Grant Thornton Consultants predicted that U.S. auto makers may close about 2,500 U.S. dealerships in 2009;
• … 12,000 workers were laid off last month by AT&T Inc.;
• … Sprint Nextel Corp. announced the elimination of some 8,000 positions yesterday;
• … also yesterday, Home Depot announced the elimination of 7,000 jobs;
• … and yesterday, the country’s three largest railroads admitted that 107,000 freight cars have been idled;
• … by February 1st, shipping lines will have idled container ships with capacities totaling more than 750,000 TEUs;
• … and a key economic adviser to President Obama stated that a commitment of several trillions of bailout dollars will be required.
Although officials see the stimulus plan as the only option available, it just cannot work. It can prolong the agony, but a stimulus program just won’t save us. The evidence is out there.
1. The day after Britain announced its second bank bailout (see above), Jim Rogers, chairman of Singapore-based Rogers Holdings – and the analyst who correctly predicted the start of the commodities rally in 1999 – said, “The UK is finished. I hate to say it, but I would not put any money in the UK.”
2. A New York-based economist with Stanley Morgan likens the $ 90 billion U.S. public works package to the infrastructure-spending program in Mexico. Too little, too late, too small, too slow. It won’t work because construction projects, which can take months to initiate, aren’t the best way to provide a quick stimulus to an economy. The construction industry has a limited effect on the economy and is three times smaller than manufacturing.
3. And according to the director of regional research at Beacon Economics in Los Angeles, “What infrastructure spending can do is bolster employment in a group of industries, like construction … What it can’t do is stop the unemployment rate from rising currently because there are a lot of forces coming at consumers, who are holding back on spending.”
[Let’s see now — How did we get out of this mess 75 years ago? We built ships, didn’t we?]