By : Edmond F. La’lang
Why the fiscal and monetary policies do not able to recover the economic growth, included high unemployment rate ? We must remove on old paradigm in economic science and change of much economic and monetary policies, so that we can able to resolve many economic problems in this recession and find a good vision on how to make economic and monetary that have not make much turbulencies, trouble, crisis and recession as early warning system on preventive ways in the brightness future. This is analysist to answer why the QE, stimuli, bailout, low rate and much printing money doesn't make a real recovery economic but only make much problem in huge debts, debt trap to be default, still high unemployment, low buying power, much more poor peoples, deflatoir threat condition still existing and slow economic growth. The money circulations not going to real sectors to create some opportunity business but banking tend to give credit with carry trade action to the highly real speculation with greedy for climb the mountain price in commodities, forex and stocks with no real fundamental prospects. So how the real sector being more stronger and healthy with highly their raw materials price to produce goods and service in stable prices and how the consument, especially in under developing countries to get and buy the highly consumption products price with low buying power ?
Treasury bailout $ 700 Billion and FED bailout of $ 800 billion debt that causes the U.S. budget deficit could reach USD 1.5 to 2.0 trillion and the U.S. government's plan to publish the T-Bill $ 600 Billion. The amount of USD 2.1 Trillion bailout is certainly not yet able to rapidly restore the property sector, especially to help subprime borrowers and investment banking finansil which has suffered losses amounting to USD 15.4 trillion. This bailout is only for improving the psychological effects of the market and a little patch up there in the hope that losses will come back market confidence in the property sector, financial and banking. Obama's stimulus plan in 2009 in the infrastructure sector is to be an emergency to reduce the unemployment rate, but not on fundamental problems in the real property and manufacturing sectors. We agree the analysis to some observers of the U.S. economy that U.S. auto bailout of USD 15-34 billion is just a waste of money, without touching the "basic problems" U.S. automakers inefficient, wasteful automobile fuel products, breakthrough technologies that expensive even though the car was enough life span durable. Difficulty GM, Ford and Chrysler during this time is unable to compete with Japanese automakers, South Korea and Europe in both the world and in the domestic market, due to chronic inefficiency and wasteful of fuel.
Mediumterm of Henry Poulson plan is actually quite touching to help sub-prime borrowers and other property, but it should be thoroughly good for business efficiency and the need to "take a rest, consolidation, innovation, efficiency and turn around" for recharging and recovery the U.S. economy at the level real. But with economic conditions starting point to deflatoir, then in our opinion, the U.S. will be difficult for the quick recovery and consolidation was supposed to happen first, including natural selection will occur for all business sectors. This natural selection will shed a lot of companies in major losses and bankruptcies, so that more and more weak economic conditions. This is where the need for economic policies that can gradually awaken the economic engine in nature and not by economic tehnical engineering as has been done by financial sector, where instead of getting better, but even more severe. So, "do not fight the natural law", let nature manage human life and not the other way that would further aggravate economic conditions in the long term. Deflation will form the economic rate of cold (cooling step) and not direct high rise with an indication of inflation began to rise again. The zero rate is never make a significant grow up with warming in inflation but only make a winter season with deflation and slowly growth in long time goals.
The U.S. economy and the world will go to the first winter for some time about 3 - 5 years (2012-2014) and gradually warmed up to 70-10 years (2015-2018). But if human (economics, financial and business management) tried hard to healthy returned with various "acrobat economic and management policies", instead it will make economic conditions will further cool down (deflation higher), which makes more and more companies go bankrupt, unemployment growing high, increasing consumption levels fell and the poor increases with crime, social and political upheavals which will also increasing. Thus let the business will organize its performance is supported by the government's economic policies conducive to the various efforts incentives to stimulate economic engine to start to rise again, but healthy in the long term without experiencing a severe crisis.
It is strange in the human health and environment science that severity of the economic disease which really needs to take a rest or bed rest in the hospital but the economist and monetarist with his economy science still want to rise and be strong again after turbulencies and free fall or having financial tsunami. As like climate rotation after fall season as many institution business has fall for big losses and bankruptcy must be follow the winter season as indicated of economic recession or downturn, but economist with his knowledge (but Prof. Paul Ormerod have been says that the “Economy Science is Death”) hard efforts to resistance of the natural law with the policy of giving an injection form of bailout, stimuli, low to zero rate, printing money and add big debt with QE 1 to QE 2 and I think will be much more like addicted to wants QE 3 – Q 5 until he/she broken down.
This will make the US economy instead of getting better like expected, but it is getting worse by the threat of deflation spiral and depression (Double Dip Recession predicted by Prof. Nouriel Roubini will be happen in a couple years?). Why do economics with financial engineering acrobatics instead of following the rules of nature itself with more and provide stimulus to the patient and environmental condition that have been sick to continued their activities ? Are you want ignoring and fight against the Natural Law ? And I am not sure that the arrival of spring will coming soon (economic growth with generate many new corporates and employment opportunities) with the increasing flood of printing money (maybe create a big water flooding disaster in the mainland). This is because of bad winter and not eyet the arrival spring. Thus the Fed only burn wood to warm the body during the freezing temperature at night in the woods forest but gave not inflationary core effects in to the system which actually freeze and lead to continued cooling of economic growth. So, the US peoples should not fear the threat of inflation but should the threat of deflation spiral like that have been experienced by Japan since the 1990s.
Why did US follow to Japan Economic and Monetary Policy to face his Recession with longterm Deflatoir mistake. US must be should in consolidative and efficiency of his economic and business driven and not much more add debts. So eventually, Japan and US now increasingly sank in the “Muddy Sand” with giant debts which actually has exceeded its own GDP and if experienced by small states and weak economy will be down and penalty with default and worse in trusty crisis like economic crisis 1997 in Asia (Indonesia, Thailand, Philipine) and now face by Europe countries to face default and must be want to bailout like Greece, Iceland, Ireland and Portugesea and began threat to Spain, Italy, France and maybe Britain if not careful in carrying out economic condition with prudential and smat economic and business policies. I agree the policy of ECB (Trichet) is quite and smart than the FED (Bernanke) is precisely to continued the economic and monetary policy in Japan by increasing amount of money in circulation in stimuli, quantitative easing (QE) with printing money, zero rate and more adding to the burden of debt without being able to get out of the hole of deflation and economic growth weak for over almost 20 years and this also would be experience by US economy if it continues to make “structural faults” with bizarre economic policies and problem solving are not smart.
Likewise medically that stimuli, QE and much more highly debts is like drinking alcohol that can be intoxicating and can walk out of balance, behaving strangely, talking and acting ridiculous or endanger himself and others in driving car or drink uncontrollably ecstacy, narcotics, drug stimulant and tonic but in a systemic and longterm will be even more damaging US economic system and financial itself and result in more heat and bubble conditioning in emerging market economies by hot money flows of funds and the booster to increase in commodity prices that will be destroy the growth of manufacturing industries, transportation, gasoline car by high cost of energy prices. And food commodity prices sky rocketed which causing more and more increase in the poor and social and political crises and destruction of forest to search new agricultural and settlements in various countries, mainly in Africa and Middle East.
So, we must remove on old paradigm in economic science and change of much economic and monetary policies, so that we can able to resolve many economic problem in this recession and find a good vision on how to make economic and monetary that have not make much turbulencies, trouble, crisis and recession as early warning system on preventive ways in the brightness future. This is analysist to answer why the QE, stimuli, bailout, low rate and much printing money doesn't make a real recovery economic but only make much problem in huge debts, debt trap to be default, still high unemployment, low buying power, much more poor peoples, defaltoir condition threat still exist, slow economic growth. The money circulations not going to real sectors to create some opportunity business but banking tend to give credit with carry trade action to the highly real speculation with greedy for climb the mountain price in commodities, forex and stocks with the real fundamental prospects. So how the real sector being more strong and healthy with highly their raw materials price to produce goods and service in stable prices and how the consument, especially in under developing countries to get and buy the highly consumption products price with low buying power ?
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