How the Federal Stimulus Will Affect Investors

The federal government has always respected the division between private business policy, and fiscal policy. However, in late 2008, the government felt that they could lighten the debt load, and give some federal stimulus to investors who had fallen into debt. This had the effect of lowering the debt obligations of most borrowers, but little is understood about the effects of this program. Although the government thought that they would provide this bail-out, and people would restructure their private lending habits, to avoid a similar collapse, the bail-out still continues today, and many investors have not as yet changed their strategy, to avoid relying on this bail-out money.

The federal stimulus program was structured with certain goals in mind. The initial stimulus package of 500 billion dollars, would lower mortgage rates, and force banks to lend out more money, brought about by the excess liquidity. Consumers and businesses would benefit greatly from these lowered lending rates, and the strict lending policies of banks would be made somewhat lax. The optimism generated by these predictions would also uplift the economy and create investor confidence.

The federal stimulus, as mentioned above, would lower mortgage interest rates, and there would be a surge in the number of homes bought. Any investor in the real estate industry would be looking at making increased profits from the sale of more homes. The inflation of the confidence in the housing industry would dispel fears, causing more people to invest in real estate.

However, financial consultants are advising investors not to look at the industries that are nearly collapsing from financial liabilities. Although the stimulus package is aimed at these industries, they may not respond as expected. They are advising investors to think about companies that are already capitalized, prior to the federal stimulus being released. The response of the crippled companies, to the stimulus package, may not be as quick as anticipated, meaning that investors would have to wait a long while, before getting any returns on their investments.

The federal stimulus package requires you to research investment opportunities, and see which ones will prove more profitable to you, as a result of the said stimulus.

5 thoughts on “How the Federal Stimulus Will Affect Investors”

  1. China investors should care about three major numbers this year: 8 percent economic growth, its 4 trillion yuan ($586 billion) stimulus package, and the 10 industries revitalization plan.

  2. The term ‘Keynesian economics’ means different things to different people. But one thing almost everyone can agree on is that Keynesians believe that the 2009 fiscal stimulus boosted aggregate demand, at least compared to the no-stimulus alternative. Alternatively, Keynesians believe the fiscal multiplier is positive. In my view that’s a sort of sine qua non of modern Keynesianism. Yes, it has many other things to say, but without the fiscal multiplier there’s nothing particularly “Keynesian” about the rest of the theoretical apparatus.

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