I read this article in the Economist today and it is very interesting. I was talking to a friend at hockey last night about the new proposed stimulus by Tim Geithner and we hit some of these points. However, I think that this article does a great job of taking this complex proposition and explaining it in layman's terms.
Upon first glance, I actually thought that the proposal was much more interesting and in a sense appropriate than all the actions thus far. I must say that my knowledge of the plan is somewhat limited, but I liked that the government was almost incentivizing private investors to stimulate the economy instead of spending mindlessly and egregiously on what they deemed was stimulus ($1.7M for pig odor research in Iowa?). There are large potential gains to be had and the acknowledgement that the government is not the end all be all answer to fixing our economic crisis was refreshing to say the least.
With all that said, the parts of the article I found most interesting were the critical questions it raised. Firstly the article brings up the paradox that in a time when most most private firms are shoring up their balance sheets and paying down debt, it seems ironic that getting them to take on massive debt and leverage would be the answer to our crisis. Actions are being taken, through co-investment, cheap loans, and guaranteed debt but who is willing to put themselves out there like that in our trying times.
I also really like the point that taking advantage of these government stimulus tactics is too politically dangerous for any firm that is seeking the potential profits that are being predicted. After the AIG bonus skewering, who wants to risk all the government intervention into how they do business? I am in no way saying that AIG bonuses were justified. However I think it is a complete joke that the very same Government holier than thou pukes who enabled AIG to take the bonuses are up front and center screaming taxpayer blasphemy. Not to mention many of these bureaucrats accepted campaign contributions from the likes of AIG (and probably worse) while these companies were receiving government bailout funds. It's strange that I haven't heard of too many politicians trying to pass laws taxing campaign contributions at 90% that were a result of bailout funds.
Maybe I am being to simplistic, or maybe I am just playing the I told you so game, but I have warned of the numerous slippery slope scenarios that unfold when the government decides who "needs" to be bailed out. I am interested to see how this new plan plays out and would love to hear another point of view on the topic so post away in the comments section if you so desire.