Stopping the stimulus, part one

The global economy is like an electrified cobweb

The global economy is like an electrified cobweb; all the strands of silk are dependent on one another. It is, if anything, the epitome of codependency. Since the Great Crash of 2008, we all have a better understanding of the relationship between the world’s economies. That is why it’s so draining to watch the news or read the paper on a day-to-day basis. What happens in Asia, for instance, will have an effect on America’s Heartland.

Recently, much has been discussed regarding the relationship with Ben Bernanke’s Fed and the rest of the world. In the article, “The Global Economy Has Become Heavily Addicted to Bernanke’s Dollars,” Michael Schuman of writes, “After five years of largesse, the Federal Reserve is faced with the daunting task of exiting from the unorthodox stimulus programs that flooded the world with dollars. As a result, financial markets seem set to endure all the nervousness and tetchiness of nicotine junkies deprived of their smokes.”

While the language is vivid and powerful, Schuman seems to be painting an unfair economic portrait. His deliberately conjures up images of drug dens and addicts. Money is certainly addicting; cash, in certain cases, is a crutch, but when contemplating the global economy in its entirety, we should be taken aback by its intimate tics, how it weaves a web of interconnectedness, how it reminds us that, deep down in the beating basements of our hearts, we are human and in this crazy life together.

Schuman believes that the Fed’s stimulus programs (there have been many!) have created a culture of financial pariahs, addicts really, who are itching for the next cast installment. However, there’s a problem…it is stopping, albeit slowly, these stimulus packages, hoping markets can persevere on their own. If the immediate response is any indication, the markets will relapse and threaten recovery and further growth.

In part two of ‘Stopping the stimulus’, we will discuss why it is unhealthy to view the markets and its denizens as addicts.

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