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Will the proposed tax stimulus rebate help stock markets?

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bugibar
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Posts: 107


« on: November 25, 2008, 03:28:11 pm »

The government is thinking about giving us another tax stimulus rebate in 2009. If you look at the results of the tax stimulus rebate in 2008, not much have happened. Most of the money that people got went right to savings or to emergency stashes. There was a very minor boost to the economy.

What will be the effect of the tax stimulus rebate 2009? Will people cash it or save it?

The government seems to be doling out money like it grows on trees. We all are still paying for an expensive war, golden parachutes to executives that caused the economy to crash, as well as carrying a huge national debt. Another tax stimulus rebate in 2009 means more government debt. That could potentially trigger another sell-off in the capital markets?
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« on: November 25, 2008, 03:28:11 pm »

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atari
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« Reply #1 on: November 30, 2008, 12:03:38 pm »

We have seen that the tax stimulus rebate 2008 helped stocks only temporarily when it was announced. It has not helped the economy. The stock markets went into free fall in September. So, based on this experience there is no reason to expect the tax stimulus rebate 2009 would help in any way to boost the economy.

I would be afraid of the other side of the coin. Fed can't keep printing money for ever. The government debt is humangous already. Something has got to happen. Another tax stimulus rebate in 2009 could very well undermine the credibility of the government, and if that happened, we could see another collapse in the stock market.
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porsche
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« Reply #2 on: November 30, 2008, 08:13:04 pm »

Fed can't keep printing money for ever. The government debt is humangous already. Something has got to happen. Another tax stimulus rebate in 2009 could very well undermine the credibility of the government, and if that happened, we could see another collapse in the stock market.

Of course, FED can't keep the money for ever, but the numbers are not as bad as it seems. The government debt is only between 5 and 6% GDP. It is huge in absolute numbers, but when you look at it as a % of GDP, it is not that bad. The government debt is backed by expectation of strong growth down the road. US economy is extremely flexible and was always able to overcome any crysis. We have the brightest people here, we have the best technology here. These will help to get out of the recession quickly, and the tax stimulus is designed to jump start this recovery.
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