Commentators are tripping over one another to declare this country or that
country’s stimulus package as a primary reason to pour money into its stock
market. Yet if you look at the highly damaging long-term effects of such loose
monetary and fiscal policies, an investor can come to only one conclusion: You
should invest in the country with the smallest stimulus package.
Stimulus packages are all the rage right now. President-elect Barack Obama has
promised an $800 billion package for the United States, which equates to
nearly 7% of U.S. gross domestic product (GDP). And there are plenty of
others:
- Japan has a stimulus package of $720 billion - roughly 14% of GDP.
- South Korea plans two stimulus packages - the larger of them “green” -
totaling about $50 billion, or about 6% of GDP.
- Great Britain is expected to inject about $177 billion into its economy, the
equivalent of 8% of GDP.
- France has a modest $40 billion stimulus package in place but that’s on top
of a $300 billion European Union (EU) stimulus package, so the total’s about 3%
of GDP.
- China has announced a $586
billion stimulus - almost 20% of GDP - and now appears to have decided even
that is too little.
Then there’s Germany. When the British stimulus was announced, Germany’s
finance minister, Peer
Steinbruck, described it as “crass Keynesianism.” Since
then, he’s been forced to back off that stance a bit: On Jan. 12, Germany
announced a stimulus plan totaling $70 billion over two years.
Still, even that is only is a relatively modest 2% of GDP, and Germany’s 2009
budget deficit - even with the stimulus - is projected to come in at less than
3% of GDP. That’s far less of a deficit than the country faced during the
2001-2003 recession, and means that Germany enjoys one of the soundest fiscal
positions of any country in the world.
Germany’s short-term economic outlook is unexciting, as is currently the case
for most countries. According to The Economist, the
country’s GDP is forecast to shrink by 1.4% in 2009, after actually advancing
1.0% in 2008.
