But, first the bad news
We're facing a medium-term recession, whether or not a "surge" of borrowed taxpayer dollars will help ease the pain of Wall Street, General Motors, or foreclosing "home-borrowers" in the short-term. The reason? We have lived well by depleting our assets for years, Henry Bloget points out in a great chart on Clusterstock:
Alas, a cynic could say, the strength of U.S. consumer spending--the genius of American economy over the past decade--was simply a charade of "fudge"-priced assets, similar to those backing Enron's investments in the early 2000s or fueling MMM's meteoric rise in Russia in the early 1990s.
We are now taking on a new charade: propping up today's economy by using a mythically unlimited capacity of U.S. government to--someday--pay back debt. Demand for treasury bonds is creating unprecedentedly low interest rates, despite the total surpassing $11 trillion.
(Data: Federal Reserve)
It's as though the U.S. government is a Latin American country in the 1980s. Or, a condo "fix and flipper" couple in 2004. Or, a Carlyle-Blackstone-KKR-Bain Capital in 2006. It's ready to borrow, plop down money on "underpriced assets", turn them around, and flip them for a profit a few years later. Foreign investors, once again, are happy to try their luck.
Let's be very careful with this trust. I hope Bush, Obama, and Congress are both prudent and bold in their stimulus and crisis response.
So, what's the good news?