Stimulus idea floated

belt-tightening2

Even as stimulus packages were announced for the US and much of Europe, the idea seems to be hinted at for Singapore as news of economic turmoil start to trickle in. Around the region, the Philippines has announced its plans for a stimulus package, and Indonesia has it in the works also, almost in a chorus.

It seems that a “stimulus package“ to a large extent means Quantitative Easing in the US. Where does funding for a stimulus package come from, if the US is already in a lot of debt? By getting into more debt of course. This is possible by creating money out of thin air to buy the treasury securities used to fund the US government. Something doesn’t sound right when you hear that about half of the US public debt are owed to the "Federal Reserve and intragovernmental holdings". If they have the money, why do they need to borrow? That’s because they don’t actually have the money, and everything is on credit. Repaying the debt was probably never part of the plan, which means the money that was created out of thin air stays.

Now, it’s just my guess, but i think governments around the world have to have a response to what their counterparts in the US and Europe are doing, since I would imagine that Quantitative Easing should have an impact on money supply and exchange rates. The Eurozone debt crisis and the slowing global economy seem to present themselves as good excuses and an opportunity for doing something (drastic). In any case, do get ready for a rough ride ahead, as businesses slow, while, i suspect, prices of goods will not come down despite that. Some belt tightening may help.

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