The stimulus did not work. Joblessness and misery of all kinds are increasing. The “green shoots” nonsense of the spring has subsided. It’s Nouriel Roubini’s hour, once again.
The question remains, and it is also hard to figure out, whether the recession is so bad we’ll have major deflation, or if the government’s money-printing strategy will devalue the currency and lead to hyperinflation? It’s the most important economic question of the times, and no one really knows the answer.
I lean towards inflation, but the data seems now to point more the other way. I am a crappy prognosticator in any case, but I do think prices will go up and output down in the usual “stagflationary” supply shock, as I said way back when. Whether one or the other factor–i.e., the deflationary or inflationary trend–is dominant, I don’t know. This is another way of saying, even if prices go up, I don’t think it will be signs of or helpful to a recovery, and we’re in for bad times one way or the other. I made this “stagflationary” point about the Bush stimulus way back in early 2008.
I do think it’s become clear (as it did under Carter) that fiscal stimulus and Keynesian ideas won’t work. That’s the meaning of the infamous chart showing the gap of rhetoric and reality on unemployment in the era of the huge Obama stimulus.
The only chart Obama really cares about are his popularity poll numbers, of course. And even that’s starting to slip.