Baseball, Steroids & the Economy

An excerpt from a FT Advisors report this morning:

Let’s hear it for irony. In almost simultaneous events last week Congress attacked baseball players for taking performance-enhancing drugs while at the same time supporting artificial and temporary stimulus for the US economy no matter what the long-term costs...

Many people don’t like professional baseball players using steroids because they mask the underlying ability of the player. They taint the results.

But so does artificial economic stimulus. Monetary policy accommodation can help people feel wealthier for awhile, but it cannot create wealth. In the end, trying to increase spending without increasing the country’s productive capacity is a fool’s errand. Boosting demand without boosting supply causes a misallocation of resources. Like with steroids any boost is temporary and risks longer-term economic problems.