To be right now and be praised or to be right in the long run and be hated
I did want to write about the energy space since there is much to discuss, but this issue has been nagging me. Recently I came across an article on Zerohedge on a presentation focused on the “Deficits don’t matter”. Then I keep on recalling Henry Blodgets article on Business Insider saying Keynes was right.
Both articles highlight my title: “To be right now and be praised or to be right in the long run and be hated.” This reminds me of the Greek tale of Cassandra. I think most will likely go with the first. There is no doubt a stimulus now will always feel better now. Deficits don’t matter can be rephrased – “If you can live on credit why not?” I don’t think the deficit hawks would say the economy would blow up in the next few years if we did significant monetary printing now. The next few years will no doubt feel and be better with the printing press on. It’s a question of the extent and when and who should pay the bill. I can agree with Paul Krugman that an avoidance of a depression may be worthy of printing in order to have a slower economy later. However, I am agreeing as a selfish individual. Clearly the statement is concluding – there is growth to be taken from the future to get by now. By following this recipe does the culprit of the wasteful spending ever get taught a lesson or are we creating another moral hazard. Poor capital allocation is okay because it will be supported by more spending and will be supported by future potential growth.
Time for an analogy: Since your child will be a doctor in the future, one can just rack up loans and live the good life because in the future your child will help you with your loans. At some level the child does owe some of it to you, but you are clearly requiring him/her to live less of lifestyle as they could have. Is this the path we are on?
So I throw caution to those praising our stimulus promoters and marching the victory parade. The victory parade can be made for a few, but it won’t likely be a parade 20 years from now. Optimistically, I believe the future generation will and can carry the weight, I just hope we don’t pile it on too high to the point Atlas will shrug.
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