Charge of The Light Brigade

When can their glory fade?
O the wild charge they made!
All the world wondered.
Honor the charge they made,
Honor the Light Brigade,
Noble six hundred.

Charge of the Light Brigade
Alfred Tennyson, 1870

Today the Department of Treasury is sending out its economic stimulus checks to the US taxpayers. Each taxpayer will receive a tax rebate of $600 with additional amounts of $300 paid for each household dependent.

As a taxpayer I welcome the small relief from the burden of excessive taxation. As a business owner, I welcome the infusion of money into the economy with the hope that some of the dollars will find themselves into our corporate coffers. Though many deride the amount as just a small token, (after all what can one do with $600?) when viewed in the aggregate we are taking about a major cash infusion into the slowing US economy.

Sounds great but these types of financial gymnastics of our “managed economy” can in the long run produce some ill effects that will prolong and deepen economic malaise that we are all looking to avoid at any cost. In classic economics, pumping money into an economy is highly inflationary. Lots of money chasing goods drives prices up. This is happening on a global scale. In the case of the US dollar, more dollars in circulation will put additional pressure on the value of the dollar and may drive it lower.

This could be the Treasury Departments objective. The package will help to reset market driven interest rates, stimulate consumer demand at home and make US exports more attractive because of a cheap dollar. This might work but some think the cure is worse then the illness. The fear that the economic stimulus will spark an acceleration of inflation and add to the massive budget deficit of the Federal Government is real. Many critics are suggesting that the stimulus package is borne more from political expediency that does not address the systemic and structural issues that lie at the root of the countries current economic problems like shrinking manufacturing, crumbling infrastructure, wasteful spending, unfunded budgetary commitments and misplaced investment priorities.

So as Americans eagerly wait for the merry mailman to arm them in the current war against recession, General Paulson will be watching to see how his armies perform on the battlefields of the Malls of America.

Apple iPods to the left of me…
Sony Hi Def TV’s to the right
Life Good GPS in front of me
Black berries in the rear..
Rode on the $600…

Risk: inflation, behavioral, consumerism, deficit spending, interest rates