All of us follow the news and political landscape are aware of plans to stimulate the economy. President Obama is selling the master program, urging all Americans who do nothing will have devastating consequences. As part of its program, a massive injection of capital to loans suggests both projects. Although I do not deny that something must be done, there can be no painful side effects injecting too much money too fast.
At this time, there is little interest on the part of municipalities and state governments to undertake major construction projects in difficult economic times - so the demand for cement, steel, architects, engineers and skilled workers is relatively low. Consequently, there has been a contraction in industries, companies and vendors that supply municipal and state governments.
At the same time, there are limits to the capacity they can forge steel, concrete can lot and skilled They can hire. If too much money arrives too quickly, the scene is set for considerably higher prices.
When the valve of money is first turned skilled workers made redundant back to work at the scale of reduced construction industries, will push up the capacity. Architects and Engineers add the size of their operations.
But at the time that funded projects exceeds the capacity of the service of the regional production industry, prices go up - that's a fact! Public administrations are not in competition for dollars to build roads and bridges that will be vying for entrepreneurs. Entrepreneurs compete with one another to pay a premium for workers and scarce commodities such as concrete and steel.
While we need our economy again, we must have open eyes to the real danger of flooding too much money too fast system. If you listen to obstruction of the Republican minority in Congress that would have you believe more stimulus should go to infrastructure. Not at all, for fear of causing excessive inflation is exactly why President Obama cut funding for roads, bridges and infrastructure projects. He and his elite team of economists get the "big picture."
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