by Peter Schiff: After
the Dollar: What Comes Next?
over the past weeks, punctuated by last week's dismal employment
reports, confirm the diminishing impact of the stimulus efforts
orchestrated by the Obama Administration and the Federal Reserve.
In what must be a huge disappointment to Keynesian enthusiasts,
the record doses of both monetary and fiscal narcotics did not produce
the desired results. In fact, the size and scope of the "recovery"
of the past two years was weaker than would have been expected in
a typical business cycle recovery without any stimulus whatsoever.
Indeed our current recovery is the weakest on record, despite the
biggest jolt of government stimulus ever administered.
the gathering gloom Austan Goolsbee, the Chairman of the President's
Council of Economic Advisors, argued over the weekend that the economy
is on the right track and that the recent salvo of horrific economic
reports were not significant. The poor numbers, he said, resulted
from external factors like the Japanese earthquake and the downgrade
of European sovereign debt. I don't know if he really expects anyone
to buy his story, but admitting you have a problem is the first
step toward recovery.
In a sign that
Mr. Goolsbee may have been getting increasingly uncomfortable with
his job of economic propagandist, he abruptly resigned this week.
He will be returning to academia where I'm sure he is hoping to
avoid blame for the coming economic train wreck.
have made these comparisons before, the parallel between drug addiction
and the reliance on economic stimulus is just too strong to ignore.
And as with drug addition, an economy builds up a tolerance. Each
time the government successively stimulates with printed money or
deficit spending, ever larger doses are needed to achieve the same
result. Lest we forget, coming into the Crash of 2008, the economy
had been on the receiving end of years of over stimulus. President
Bush and Alan Greenspan never fully weaned the economy of their
shock treatments that followed the dot.com
crash and the shock of September 11th.
This time around,
the stimulus-fueled recovery is so mild that the economy is already
relapsing into recession before the Fed has even begun to tighten.
This puts Bernanke in a very difficult position. He either follows
through on his loudly trumpeted plans to end quantitative easing
this summer, or abandon those plans in favor of more stimulus. Both
choices are unappealing.
Schiff is president of Euro Pacific Capital and author of The
Little Book of Bull Moves in Bear Markets and Crash
Proof: How to Profit from the Coming Economic Collapse. His
latest book is How
an Economy Grows and Why It Crashes.
© 2011 Euro Pacific Capital
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