Viagra and the Stimulus

Economic policy today is the arena for a mighty clash between competing ideologies.

The first ideology is that the economy is like a single-cell bacterium. It occasionally misadventures into hostile places; however, pricked by discomfort, it corrects its course and returns by itself to a happy state.

The other is that an economy is like a dead rock. Purely by accident, it finds itself in the wrong place, like say someone’s kidney. It can then only be salvaged by the energetic intervention of public officials seeking glory and greatness.

We subscribe to the former creed, but our ideology unfortunately leaves micromanaging officials with nothing to do. Not that the hundreds of billions in stimulus funds and quantitative easing they’ve thrown at the recession have helped. Apparently, the economy was not informed that by now, it should be recovering swiftly.

Unwilling to admit that intervention is pointless, some argue that it wasn’t enough in the first place. Warren Buffet likens the stimulus so far to half a pill of Viagra, and wants the full dose. Considering his nervousness about his investment portfolio (and being 78 years old), it is normal that he wouldn’t mind bankrupting the next generation to boost his stock price. After all, he won’t be around to pay the bill.

President Obama likewise is on the defensive: his spiel is, the stimulus will work -some day. Which is rather like a doctor prescribing impotent medication, then taking credit when nature eventually cures the patient. Here, the despairing Bank of England has finally thrown in the towel and stopped printing money. Basically, the UK’s fiscal credit card is totally maxed out.