Stimulated without the Stimulus
The Wall Street Journal published two articles recently that show there is a light dimly shining at the end of the tunnel, perhaps marking the end of the recession.
The first is that employers are shedding far fewer temp employees than in months prior. The temp employment market normally precede normal employment markets, so the fact that the temp market is stabilizing is a good indication that a recovery is in the offing.
The second is the front page article in today’s paper reporting that Cadbury rejected an acquisition bid by Kraft. The recent burst of activity on the mergers and acquisitions front is always a good sign and indicates that the recession is on its way out. The Kraft bid follows Disney’s purchase of Marvel, JBS’s bid for Pilgrim’s Pride (to make it the second largest meat company in the world), and Baker Hughes $5.5 billion purchase of BJ Services to consolidate its oil- and gas-field services operations.
M&As mean that there is no longer a liquidity problem as banks are willing to extend credit to these corporations to make these purchases, but, equally important, they mean that business are confident and optimistic about the future. The economy will stabilize and employment will increase.
All of this no thanks to the stimulus package or any action on the part of the Obama Administration. We’ve spent only 10% of the $787 billion package (~$78.7 billion), yet the economy is now recovering. In fact, according to the head of the Federal Reserve in Dallas, the recession is over.
So, think about it. The economy is recovering before any major overhaul of the financial sector, before nationalizing health care, and before a substantial portion of the stimulus package was spent. We can conclude that we could have achieved the same results of the $787 billion stimulus package with a stimulus package of $78.7 billion, avoiding such a gargantuan increase in the national debt and the requisite pain and suffering for our posterity.
Or maybe, just maybe, we can conclude the recovery isn’t related to the stimulus package at all, and the Keynesians have been wrong all along…
