Food for thought

(Source: Hoisington Quarterly Review and Outlook). Studies suggest the government expenditure multiplier is zero to slightly negative. Increased deficit spending does appear to provide a modest lift to GDP for three to five quarters, depending upon the initial conditions of the economy. However, following this small, transitory gain, deficit spending actually retards GDP growth and the economy returns to its starting point at the end of about twelve quarters.

....the Trustees of Social Security and Medicare have calculated that the present value of unfunded liabilities of these two programs totals $59.1 trillion. Additionally, there have been tabulations that all federal government liabilities, including those of Medicaid, veterans and other defense obligations, pension liabilities of government employees, and additional federal programs total $200 trillion at present cost.

...Gerald P. O'Driscoll Jr. of the Cato Institute and a former Dallas Fed Vice President said the Federal Reserve is engaged in a bailout of European banks under the guise of what the Fed terms "a temporary U.S. dollar liquidity swap arrangement." Dr. O'Driscoll indicates the Fed and ECB are engaged in this roundabout transaction since each needs a "fig leaf" because the Fed does not want it known that the Fed's balance sheet is being made available to foreign banks.

All this is conducive to very slow growth in the coming years. It is essential to have these type of input in your investment plans and strategies.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

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