The New Stimulus Package Signed by Pres. Bush

The stimulus package was recently signed by President Bush. The big question: Is this enough to keep the economy from falling into a recession. The economists say a recession is 2 quarters of negative growth. Another question is: If the checks start going out in May, how long will it take before that money finds its way back into the economy by way of consumer purchases. Some economists sight the fact that not everyone spends their check on new purchases and some use the cash to pay bills, while others put the money in the bank. Where is the $150 plus billion going to come from? Are we going to borrow that money from the Chinese only to buy more products made in China? When you present your government check to your bank, the bank credits your account . But where does the government get the money to honor that check? The Federal Reserve Bank credits your bank’s account at the Fed, but where does the Fed get the money to cover that check? Yes, the US Treasury will make good on that check, but where does the US Treasury get the money? They borrow it. And the beat goes on. Inflation doesn’t seem to be on too many people's minds, but for those of us that managed bond portfolios in the late 1970’s into the early 1980’s, remember what inflation can do to the price of bonds and in turn the yield curve. It is never, in my opinion, to early to be concerned about the prospects of bigger deficits leading to higher long term interest rates. With the war in Iraq, and the huge deficits that are taking place, the prospects of another round of inflationary pressures is not in the too distant future. With gas prices over $3 per gallon, the cost of everything from bread and butter to durable goods is likely to continue to rise. Stay tuned.