Thursday, April 30, 2009

A FAIRY TALY - Do you buy the spin...?

Table#1

Monetary / Fiscal Stimulus (% of GDP)

Peak Trough  Length(Months) Decline in GDP  Monetary  Fiscal  Combined

% of GDP

Aug ‘29 Mar ‘33  43 27.0%  3.4%  4.9%   8.3%

May ‘37 June ‘38   13  3.4%  0.0%  2.2%  2.2%

Nov ’48 Oct ‘49  11  1.7%  -2.2%  5.5%  3.3%

Nov ‘73 Mar ‘75  16  3.1%  0.9%  3.1%  4.0%

July ‘81 Nov ‘82  16  2.6%  0.3%  3.5%  2.8%

July ‘90 Mar ‘91  1.3%  1.0%  1.8%  2.8%

Mar ‘01 Nov ‘01  0.2%  1.3%  5.9%  7.2%

Dec ‘07 -  15  1.8%  18.0%*  11.9%*  29.9%*

*Estimated

Source: Federal Reserve, Congressional Budget Office; as cited in Grant’s Interest Rate Observer,

“Sold to you, Uncle Sam,” Vol 27 No 7, 3 April 2009, p 2, “What the government did—and didn’t do” table

“hat tip” Jim Puplava




TABLE #2





Imagine your are a politician in power and you experience the crisis of your lifetime. 
You push on every button and stimulate (pls see #1 . table)  the economy at a pace 4x as hard as your predesessors did during the GREAT DEPRESSION.
But this sucker still panics and goes into a deepdive into March 2009.

What would you do, how could you pull the people out of a mood of desperation?

Wouldn't you turn to someone you trust, who could let's say support a tailspinning ,mood darkening Equity market....?
(Pls look at Table #2, showing Goldman's prop desk spinning a huge wheel)

Voila, a miracle "green shoots" rally emerges with more momentum and power than anything we've seen a long time (we are talking decades in terms of technicals!!) 
but ....unfortunately with lacking Volume, meaning some folks are still hesitant to believe what their eyes are seeing....

After 8 weeks of "pure force" Uncle Ben from the FED tells us the that the worst is behind us. (pls see below)

Do you buy it ?



http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm

"Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower....."





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