Many economists have started to criticise the trillion dollar fiscal stimulus programs by the Obama administration. Hasn’t the American learned from the Subprime crisis when it all started during the 2001-2002 recession, the Americans cut rates and boosted public spending. This brought a bubble in the housing sector which causes serious consequences to the rest of the world.
Now, with the current recession, the Americans is going to pump in trillion of dollars to boost its GDP. And the consequences? More debt and bigger bubble!
The Americans are not alone. Most of the governments around the world are increasing on their fiscal budgets and bailing out troubled banks to help steer their economies out of the wood so as to gain popular votes from the people. “China is back in bubble land,” warned the Financial Times. According to Bill Bonner, in the first six months of this year, Chinese banks lent more than $1 trillion, or about four times the rate of 2007. This loosening of monetary policy by the Chinese Central Bank is bound to add more trouble to the world in the future.
Why? Because no one would like to bite the bullet and let the economy suffers like the 1929 Great Depression. So let’s face the consequences when the next bubble blows up!