Biderman On Malinvestment And Diminishing Returns From Intervention

Tyler Durden's picture

Instead of his usual rant, Charles Biderman of TrimTabs discusses the reality of the macro environment with Madeline Schnapp - though do not worry as the sense of sarcasm and disbelief at the government's actions and hopes is palpable. Noting that our economy is at best growing 'sluggishly' based off her real-time macro data,  Biderman's right hand goes on to explain to him that inflation is running hotter than the government would like us to believe. More importantly, she hits the nail on the head with regard to what Biderman notes is the wasted stimulus money, saying that the economy needs to clear the malinvestments, not sustain them through stimulus transmission mechanisms, in order for growth to once again re-appear. Historically QE2 did manage to create some inventory restocking and pick up in wages/salaries in Q1 2011 but Operation Twist appears to have little to no impact on the real economy (outside of government statistical modelers) - which as we have said before indicates the diminishing returns to government intervention. What is clear is that, as we have noted, that post the 1971 modified gold standard, over a long-period of time it has taken an 'unsustainably' increasing amount of government debt to create economic growth - with the post-2008 insanity that we need $2.50 to create $1 of economic growth. The two end with a discussion of the debt ceiling and deficit potential for a black swan event.

 

 

Chart: TrimTabs