InvestorJabber: The Great Debate Ensues
Some time over the summer when the debate between Paul Krugman and Niall Ferguson became a financial headline, we stood on the side of Ferguson, fearing the untenable expansion of debt would slowly but surely drown US economic growth, a fate most gluttons suffer at their own hands. What a difference a couple of months makes.
It has become more apparent that Krugman’s famous invocation of St. Augustine was answered and the Fed has opted for stimulus now and austerity late much to our delight. The current economic predicament has resulted in a Hobson’s choice for the Fed and Treasury and another round of stimulus is the only viable plan of action available. QE2 should give the markets a boost as well, and hopefully attractive the $13 trillion dollars of investor money from the sidelines back into the markets. Though the market will eventually hit a wall, there will be plenty of opportunities in the interim to make money, or at least this is what the Fed is hoping will pan out. As corporate earnings fatten and consumers pick up spending, businesses will hopefully look to expand their employees and so goes the mechanism to full recovery. Let’s just hope QE2 ends up giving the economy the shot in the arm it needs. Otherwise we do not want to live through Ferguson’s grim scenario. This is certainly the first time I hope he is wrong.
