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Bernard M -- Taipei English Tutor

Bernard M - English Conversation / TOEFL / IELTS 一對一英文會話

Monday, December 8, 2008

The $NT 3,600 will mislead Taiwanese consumers and investors

One overlooked problem with the government program of boosting consumption by giving out $NT 3,600 vouchers is that it may mislead consumers and businessmen. In the first case, if the vouchers do in fact temporarily boost the economy, some people may misinterpret this as more than just a temporary improvement, thus consuming or spending more than is warranted by the underlying fundamentals of the economy. 

In the second case, a sound economic recovery may happen to coincide with the voucher stimulus. But now, especially cautious consumers and investors may discount the recovery, mistakenly attributing it to the voucher scheme. They will be waiting for, what they believe to be a false recovery, to fizzle, hopefully to be followed by a true recovery. All the while they will be delaying their purchases and investments, which will of course prolong the slowdown.

Artificial stimulation of the economy makes it much harder to predict the future direction of the economy. Not only is the economic data itself harder to interpret, but now investors must also try to read the political tea leaves: What will polititians do next? Will they approve another stimulus package? When? How much? Interference in the economy adds political uncertainty to the untold difficulties of strict economic prediction. To some extent, this is even true of beneficial interference, such as tax reductions.

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