Thoughts from Nobel Prize winners

“The real problem with this plan is that it won’t work,” Krugman (the newest laureate) said in his New York Times opinion column.

Geithner appears to be going back to the “cash for trash” approach of his predecessor as Treasury Secretary, Henry Paulson, Krugman said. “This is more than disappointing. In fact, it fills me with a sense of despair.”

The Treasury plan “is a little complex to implement,” Spence (co-winner of the 2001 Nobel Prize in economics) said. “I assume the Treasury has done its homework, and has people lined up” to commit private capital to Geithner’s public-private partnerships, he said.

“This program is crucially dependent on the private sector as participants and price setters,” said Spence.

The U.S. government plan to rid banks of toxic assets will rob American taxpayers by exposing them to too much risk and is unlikely to work as long as the economy remains weak, Nobel Prize-winning economist Joseph Stiglitz said on Tuesday.

"The Geithner plan is very badly flawed," Stiglitz told Reuters in an interview during a Credit Suisse Asian Investment Conference in Hong Kong.

Bottom line. The plan is not a sure thing. We know, however, that the markets will eventually win. We will know "if and when" from the trends of our indicators.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/. You can review The Peter Dag Portfolio, free of charge of course. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

George Dagnino, PhD