For the last year or so as I’ve been visiting with clients during our periodic reviews, I’ve often shared my belief that after all of the stimulus of the past few years has been enacted, the economy will eventually have to stand on its own two feet. If it can’t, our global finance ministers may believe that endless additional stimulus will be required. The best analogy I can offer is this: think of how a parent may have trained a toddler to walk for the first time. You hold their hand for a while, and eventually they get up enough strength and courage and eventually you let go and the try it on their own. And of course they fall at first, but they get up and try again, and again and again until they can do it. It takes a bit of time, but every parent knows that they can’t do it for the child. They have to do it on their own.
Think of the global economy and the markets as toddlers (an apt analogy, especially when the toddler throws a fit!). Bernanke and Geithner and other finance ministers in other countries need to let the global economy learn how to walk again, by letting go of their constant belief that without additional stimulus the economy might never figure it out on its own. It will, but it might take a few tries and it might take time but the strongest economies are those that are allowed to fall down on occasion, and are given the opportunity to get back up again and walk on their own.
It does take courage to let go, and it will take courage to lay out a plan to end the incessant stream stimulus packages. But it’s time.