Is a New Stimulus Coming?

From Paul Krugman’s NY Times Op Ed yesterday –

“So here’s my message to the president: You need to get both your economic team and your political people working on additional stimulus, now. Because if you don’t, you’ll soon be facing your own personal 1937.”

http://www.nytimes.com/2009/07/03/opinion/03krugman.html?_r=1

Do you remember when Krugman called the 50 US Governors “50 little Hoovers”?
What he meant was this – because States are forced to balance their budgets, when they run deficits, they are forced to lay off workers. These layoffs lead to higher unemployment and slower economic activity.

Krugman thinks that it is better to borrow money to employ excess workers than it is to do layoffs. In my opinion, this line of thinking is moronic – but it benefits the Unions, so Obama will probably be all over it.

My guess is still that the next “Stimulus” will be a round of financing for State and Municipal governments. The Feds will either guarantee new Muni’s (ala Barney Frank) or use Federal Funds to pay for State spending. Expect the new plan to cost another cool $1 trillion or so… Also expect some sort of crisis to be used to drive Public Opinion into the camp of approving a new round of “Stimulus”.

Peter Boockvar made it clear that this new money creation will lead to inflation and inceased prices for gold and Commodities.