Bail it out and they will come

Now that TARP has given up the ghost and become a vanilla stimulus package, the queue of industries lobbying for a piece of the action grows by the hour. The latest group to the join the party are retailers, who are urging government action to boost consumer spending.

We've sadly been here before, and the reality is that a temporary rebate to consumers is at best a damp squib. In the current climate, any sane household is more likely to warehouse a rebate into cash, or maybe pay down some of their (extensive) debts. A bit of healthy de-leveraging would be the logical step, but I am making the assumption that households will resist that additional flat screen TV purchase.

Retailers should look to Japan, where similar initiatives have failed repeatedly. The nightmare scenario would be if consumers did go and spend the rebate - thus storing up even more problems for the future, and making the endgame even worse.