Why we needed a fiscal stimulus

There are two interesting pieces in todays blogs and newspaper articles.

The first is from Robert Reich

http://economistsview.typepad.com/economistsview/2009/09/is-government-helping-or-hurting-business.html

He makes the evident point that the Dow is hitting the 10,000 mark because, while market-induced spending is well down, government-induced spending is up and holding up the US economy.

The other feature is by Alan Wood in todays Australian

http://www.theaustralian.news.com.au/story/0,25197,26116016-7583,00.html

He warns that, despite the firm regulatory structure in Australia, our securitisation market shut down along with those of the US, Europe, Britain. Why? Because our market suffered from what is referred to as broad damage the fact that US and other investors shied away from all asset-backed securities regardless of their quality

This must put paid to two arguments: firstly, that the US economy could have survived as well without any fiscal expansion; and, secondly, that Australia’s stronger regulatory institutions could have prevented us from running into a financial malaise.

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