Monday, December 08, 2008

Bonddad: Now is the Time to Spend

If you are not already familiar with famed online financial commentator Hale "Bonddad" Stewart, I'm glad to introduce you. Hale Stewart is a Houstonian and bond trader. He is also an attorney specializing in estate, international tax, M&A and business issues. He is a frequently recommended luminary for lay people at Daily Kos, which features his latest post in support of the Keynesian "spend now and spend big" arguments such as those featured on this blog.

The technical arguments against spending are obvious and reasonable under normal circumstances. However these are anything but normal times. Stewart takes a moment to address why threading this needle has a better chance of working at this point in time than other options (such as Hooverism).

The thrust of his arguments are this:
  1. The US Dollar has, after a 20% run up in recent months, room to give up value in the wake of new spending;
  2. 10-Year Treasury interest rates are at multi-year lows, indicating a continued strong demand for US debt; and
  3. Nothing is certain and there are no sure-fire solutions
I couldn't agree more, except I think he's too cautionary, as if we have any other option. Like I've said previously, when a nation is in a deflationary spiral, the only sensible action is to apply inflationary pressures. If the inflationary demons start to rear their little heads, then deflationary controls must be put in place. Rinse and repeat until things stabilize. This is no time for nibbling around the edges or quibbling around theory.