re: #480 Obdicut

Ironically, higher government spending right now would ease investors fears and lead to greater investment. And that is straight from the arch-Republican CEO of my former company, and the manager of a hedge fund that I know, also a staunch R. (though they’re probably sitting this election out, since they’re fiscal Rs.)

Well that is his opinion.

but if you are making the uncertainty argument regarding the economy, then more federal spending without a clear revenue plan will not result in more certainty. What it will result in is more competition for a tight capital supply, resulting in less capital for risk intensive activities while simultaneously signaling that the US Administration is in a full Keynesian bear hug a la Japan’s lost decade. And, as with Japan, when the latest salvo of intervention fails the government dreams up a new and improved one which adds yet more uncertainty - after all, you can’t predict what the winning political whim will be and can’t model the risk in a Black-Scholes formula, so you can’t price anything.

The Japanese “bottomed” when they finally got their housing market functioning again. In ten short years japan went from a nation that lectured the US on not having a culture of saving to becoming the world’s biggest debtor economy. All due to bad policy decisions in hopes of avoiding pain.