Financial Lessons from Chernobyl

The American economy today, especially all the attempts at “stimulus”, bears a striking resemblance to the events that lead to the April 1986 Chernobyl nuclear accident.

On that fateful day in the Ukraine the nuclear reactor operator s were trying an experiment to generate emergency power from the turbines in the event of a reactor scram (an emergency shutdown). Problem is nuclear reactors (especially of Russian design) don’t turn on a dime and controlling the output of the reactor at low levels proved very difficult. In order to try to achieve the minimal power levels needed a large number of the cadmium control rods were removed from the reactor.

Nothing changed. The power level remained low. So more control rods were removed.

Still nothing. So even more were removed, violating well established safety and operations procedures (not just Russian but worldwide throughout the nuclear industry).

Sudden – the power spiked off the chart!

The reactor operators pushed back in all the cadmium control rods.

But it was too late.

BOOM!

The Chernobyl nuclear accident was now history.

Now compare what the Obama administration has done with the American economy in terms of bailouts and stimulus.

Billions for the AIG bailout
Billions for the bank bailout
Billions for “stimulus”
Cash for Clunkers
Cash for Caulkers
Tax credit for home buyers
99 weeks (so far) of unemployment benefits

And yet as of writing this unemployment is at 9.6% and expected to rise.
The market is down and shaky.
New home sales have hit a 15 year low.
Consumer confidence is poor.Consumer spending is in the tank.
Business hiring is very slow.
The Dow dropped below 10,000 less than a month ago.
Gold is at a new record high over $1,300 per ounce.

Yet the Federal government keeps pouring more and more money into the economy and bailing out or saving this or that business and sector. This is equivalent to essentially removing all the controls and safety devices of the economy. Meanwhile, the expected boost just hasn’t come.

And just like with Chernobyl when enough of the controls have been removed – Boom!

More likely Crash but the end result is the same.

History repeats.