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Government bailout and stimulus worked. Look at all the TARP recipient banks, most of the banks who took the money have returned it to the treasury and are sitting on much stronger capital today than in 2008. General Motors is also another success story with regards to government intervention. If the Government had let GM go in an disorderly fashion, the result would be destructive to the auto industry and economy as a whole. Now GM is back, and ready to file an IPO to get the government off their back before year end.
After what the leaders of the world have seen and how fast can financial markets (credit markets especially) can ripple through and affect the real economy, policy makers around the world are very sensitive to what is going on in the world. So to say, we will have another significant downturn in the near future is exaggerated in my opinion.
Fiscal policy remains to be stimulative and monetary policy is pedal-to-the-metal accommodative. Corporations' balance sheet and earnings are strong and healthy, as they are sitting on record amount of cash. Companies are also able to borrow at exceptionally low rate. IBM issued a $1.5 billion 3-year notes at only 1 percent, in effect showing the tremendous strength of debt market. Credit market is the real reason why this recession felt so different than previous one. But today a lot of companies are able to finance their operation at record low rate, bankruptcy rates have come way down, which is another reason why there is no double-dip in the cards.
With regards to the videos, people like Peter Shciff talk about his own book every chance he gets. This guy has been a gold bull since $200. Sure, he has gotten it right. But $5000 an ounce for gold? Get real. Shciff also likes to invest in emergency market, for some reason, he thinks that the developed countries like U.S. can go to hell, while countries like China and India is going to do great. There is no decoupling, we live in a global economy, everyone is connected. If the United States go to hell, everyone else will as well. Just look at the damage done by one investment bank - Lehman Brother. If we listen to what Peter Shciff is suggesting, then we will have 20% unemployment and this is politically unfeasible.
Now this is to the people who are fearing-mongering others on the record deficit and debt. First of all, record deficit and debt is a result of the recession and government's effort to revive demand. It is the effect not the cause. One of greatest myth out there is that people think too much pubic debt will lead to soaring inflation down the road. But that is just not true. The treasury market is the most liquid market in the world and will continues to be, as investor perceive U.S. government debt to be the safest of all investments. Not a single developed countries have defaulted in the last 60 years; developed nation like the United States, EU nations, Japan can take on a lot more debt than you might think. Beside, the main reason government are taking on more debt is because private sector and consumer are de-leveraging. Without the government taking on more debt, we'd all being in much bigger trouble.
The real worries right now is not inflation, but deflation. However, do not underestimate the power of accommodative monetary policy, or should I say don't fight the Fed.
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