Stimulus Performing as Expected

Watching The News Hour last night I was fortunate enough to catch Mark Zandi talking about the stimulus. You can listen to an audio recording of the segment here.

I found his comments refreshing as he seemed fairly non-political and well informed. This morning I located Mark's recent analysis (June 22nd, 2009) that explains his position in a bit more detail:

U.S. Fiscal Stimulus Revisited

• The stimulus that became law in February should reach its point of maximum economic benefit this summer.

• Most of the benefit so far comes from checks to state and local governments and expanded unemployment insurance benefits to workers.

• The plan is performing about as expected, but policymakers should be prepared to do more if the economy flags.

During the program last night Congressman Cantor (R - VA) repeatedly stated that the stimulus has failed solely because unemployment numbers have risen higher than expected. This seems to be a disingenuous attempt to criticize the President and the stimulus pack for the simple reason of obstruction but I acknowledge that he is probably doing what is expected of him by his party, if not his constituents.

It was continually pointed out by Congressman Van Hollen (D - MD) that the stimulus is a two year plan making it too early to gauge success. That being said Mr. Zandi's comments indicate that the plan, at this point, seems to be performing as expected regardless of any fear mongering.

Iceland's Financial Collapse Mirrors Wall Street

I've just finished a lengthy and interesting article about the financial collapse in Iceland. There are many, many parallels between their situation and our own here in the United States. Perhaps this article will reinforce the alarms which should sound in every single person when they are offered something for nothing.

Wall Street on the Tundra

Iceland’s de facto bankruptcy—its currency (the krona) is kaput, its debt is 850 percent of G.D.P., its people are hoarding food and cash and blowing up their new Range Rovers for the insurance—resulted from a stunning collective madness. What led a tiny fishing nation, population 300,000, to decide, around 2003, to re-invent itself as a global financial power? In Reykjavík, where men are men, and the women seem to have completely given up on them, the author follows the peculiarly Icelandic logic behind the meltdown.

Particularly interesting is this indirect argument for regulation:

One of the hidden causes of the current global financial crisis is that the people who saw it coming had more to gain from it by taking short positions than they did by trying to publicize the problem. Plus, most of the people who could credibly charge Iceland—or, for that matter, Lehman Brothers—with financial crimes could be dismissed as crass profiteers, talking their own book.

It doesn't take a rocket scientist to figure out that kids playing together with no supervision will not do what's best for the group as a whole. The same thing applies to any system driven by self interest and promotion (i.e. unregulated markets). Independent regulation and oversight is a must for any long term balance and safety to be maintained.