Nowadays, nobody can deny the fact that the whole world is having economy recession.
How it was getting started? I guess everybody knew it already. Sub-prime mortgage, non-performing loans, then the banks started not to trust each other, then the money got stagnant, consumers lost confidence to consume crazily as ever... Lehman Brothers, AIG, Citigroup, GM motors, bla bla bla...
It's all started in America. And then, they started to save the economy, by providing huge amount of stimulus, bail-out and so on. Stimulation of the market, so they said.
The question is: Will stimulus solve the problems?
The governments around the world now following the bandwagon, keeping pumping money into the market, to 'boost the spending', and so stimulate the market, and so the economy.
First they started with millions, then now trillions.
The problem is: Do the people (I mean, normal people like you and me) able to even taste the stimulus? And if not, then where is all the money gone?
From personal point of view, I think, stimulus doesn't work.
It will make the economy temporarily high (that's what all of us chasing for, maybe). The share market will go up everytime the governments announcing new stimulus. But it's all just symptomatic treatment.
It's like patient complaining of pain, then the doctor doesn't care about how the pain get started, and prescribe only pain-killers, then ask the patient go home. Well, it will solve the problem for a while. The pain will immediately resolve, because of the effect of pain-killers. But the pain-killing effect has its period. After a while, the pain-killing effect will wear off, then the patient will have to take another dose of pain-killers. Even so, it's still alright, cause maybe the doctor already gave the patient many pills, and so, can help resolve the pain for quite some time. However, one day, the patient will run out of pain-killers. And the pain starts all over again. And the patient shouting for help, again. And so, the patient go to the doctor, and the doctor, still, ignore the cause of the pain, and prescribe more pain killers. One day, the pain-killers no longer working. And the doctor prescribe higher dose of pain killers, or different types of stronger pain-killer. Throughout the sessions the patient seeing the doctor, the patient was getting so-called treatment, and happy with it. But, in the end, as the problem being delayed for too long, the root problem cannot be solved anymore. Maybe, the patient is having cancer. If the doctor was willing to check carefully, and pay more attention, he might have solve the problem since the beginning, and would have avoid the pain-killer nonsense. But, because of the ignorance, and so much of symptomatic 'treatments', it's all too late. The patient finally collapse, and this time, really, nothing can be done anymore.
The stimulus, is actually like the pain-killer. It's not solving the problems, it's just symptomati treatment. The longer period of stimulus being given, the longer period the problems are delayed to be solved. One day, all the problems will be snowballing, getting much bigger than we can solve. Then, I really cannot imagine how it's going to be.
Most of the stimulus just doesn't make sense to me. The economy recession is mainly caused by non-performing loans, but the stimulus plan is encouraging all the banks to give out more loans to the public. In short term, yes, the economy will get stimulated, everyone will start to spend more. But such type of spending, is dangerous.
One day, the government will running out of money, to provide another dose of stimulus. Then, the economy will surely gone down again. And so, the consumers' confidence level will gone down again. When it happens, surely, the production industry will cut off their production, resulting in more job cuts. Then, this time, because of the previous stimulus, the banks were giving out massive loans to the public. Now, part of the public started to having trouble paying off the loans, because of the job cuts and so on. The non-performing loans are being accumulated again. Till one day, some banks cannot handle the non-performing loans anymore, and get bankrupted. Then the domino effect starts. When it's serious enough, it may cause a country to bankrupt as well. Because during the second round of banking finance collapsing, the government might not have any more money to bail them out anymore.
If that really happens, it will be no longer banks don't trust each other anymore. It will be developed to countries don't trust each other anymore. If it's really happened, I don't want to imagine. Maybe, it will never happen. I pray that it will not.
Hmmm, so much of stimulus......
