A majority of people don’t really anticipate time lags. The results of Congressional legislation usually takes anywhere from 2 to 12 years to really take effect. Our leaders suggest that we have hit bottom and are rebounding out of the recession. I really have to wonder about that!
Legislators in Georgia a while back passed a law against unfair lending. The net result of the law, was to shut down bank lending in the state. The banks didn’t want the hassle. Congress passed a law for writing off farm machinery in a five year period. Hummer sales exploded for three years. Not quite farm equipment, but it qualified for the deduction.
A lot of times, the net result of a given action has very unexpected results. The UN taught people to farm in Africa 30 years ago and how to use fertilizer. It seemed like a real success story. People came to the area and the population exploded and things were fine for a while. The one thing overlooked was the need for firewood for cooking fires. 15 years later, there were no trees and the rain fall erosion turned the fertile fields into gullies and the population either starved to death or moved on.
When we examine cause and effect, there is a time lag between the two. Easy home loans created a speculative bubble. What we are looking at are the unintended consequences of economic forces that have a time lag built into them.
We do know that the Congress of the 1930’s figured that they had a chance to stop a lot of this stuff we are experiencing from ever happening again. Of course we were far wiser and knew what we were doing so, we changed the rules back to make the game better. After changing the rules in the early 1990's, things worked marvelously, everyone got rich. But then Bear Sterns had a small problem. The Nemesis from the 1930’s reared its head, with the same time lag.
Our government has initiated several programs to save the economy, from spending money that is nonexistent, to printing money to give to banks that has been lost through bad investments. I suggest that there is a time lag. What has been done will take several years to be “appreciated.” It’s a little like giving you underage girlfriend a girdle to hide her pregnancy. You haven’t altered the outcome----only made it more of a surprise.