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Will Austerity Be The Catalyst For War?
As always SocGen's Dylan Grice comes out with some tremendous insights in his latest weekly piece "Double dips, siren calls and inflationary bias of policy." While the gist of the piece is presenting a comprehensive overview of the traditional and cognitive biases toward inflationary policies and away from hard, unpopular, deflationary/austere measures, Dylan provides a chilling anecdote involving the 1980s conflict between the UK and Argentina, in which it was precisely war that pulled an extremely unpopular government, that of Maggie Thatcher, out of the gutter of public opinion, and soaring in popularity. Thatcher, who came to power oddly enough on a "mandate to smash inflation, smash the unions and downsize government", saw her popularity immediately slide to 25% (see chart) as people realized the very real pain associated with austerity and a regime fighting run away government. A tangent in Grice's argument is that on very rare occasions, the people of a country do end up making the decision to take on hardship, instead of kicking the can down the road (are you listening Summers?). Yet they promptly grow to regret their decision. So what was it that saved the government, and allowed the Conservatives a second term in which to complete the painful austerity project? The declaration of war by Argentina's General Galtieri over the Falkland Islands. The result was soaring popularity for the Iron Lady, and the rest is history. Looking forward, now that all of Europe is gripped in austerity, and make no mistake - this very same austerity is coming to the US on very short notice (sorry Krugman), and popularity ratings for all political parties are crashing, has the political G-8/20 elite been focused a little too much on the Falkland war? Is war precisely the diversion that Europe and soon America hope to use in order to deflect anger from policies such as Schwarzenegger's imposition of minimum wage salaries yesterday (yes, this is pure austerity)? And is there a Gallup or some other polling "unpopularity" threshold that the G-20 is waiting for before letting all those aircraft carriers parked next to the Persian Guld loose? Read the below excerpt from Dylan and make up your own minds.
From SocGen's Dylan Grice
How about the UK in the 1980s though? Wasn't Thatcher elected in 1979 on the back of a promise to bring down inflation, smash the trade unions and downsize government? In other words, wasn't Thatcher elected with a mandate for deflation, which demonstrates that sometimes electorates do elect governments to take tough decisions?
Strictly speaking, the UK in the early 1980s doesn't belong in the same category as Canada, Sweden and Finland in the early 1990s. It had lurched between crises in the 1970s the way an all-day drunk lurches between lampposts: inflation peaked at 25% in 1975; the IMF were called in 1976; the bleak "winter of discontent" of 1978/79 saw widespread power cuts and widespread strike actions by, for example, rail engine drivers, lorry drivers and ambulance drivers.
More infamously, rubbish piled up in Leicester Square after Westminster Council allocated rubbish to be dumped there when refuse collectors went on strike, and coffins piled up in Liverpool after gravediggers went on strike. When asked what the council would do should the gravedigger strike continue Liverpool's Medical Officer said the decomposing bodies would probably have to be thrown in the sea! The gravediggers soon got what they asked for and the strike only lasted two weeks.
So when in 1979 the UK electorate voted in Thatcher on a ticket of painful deflation, the crises caused by a weak and out-of-control-government weren't simply abstract, as they are to most of us today. They were real, and it was in the midst of this chaos that Thatcher came to power.
However, despite winning a clear mandate to smash inflation, smash the unions and downsize government, her immediate reward for carrying out her election pledges was to be marked as the most unpopular prime minister in British political history and by early 1982 her approval rating had slumped to 25%. Despite having voted for Thatcher’s painful medicine and having even understood the need for it, UK voters in the “hot” state people inevitably feel when unemployment spikes had less tolerance for the bitter medicine than they thought they would have in the distantly “cold” state of May 1979.
Squealing with pain and begging for it to stop (364 economists - including former and future Nobel Prize winners - signed an open letter decrying Thatcher's plan to raise taxes in the depths of the 1981 recession to cut borrowing as having no basis in economic theory). Thatcher's chances of a second term to complete her project looked doomed...?
But Britain wasn't the only divided nation in need of social healing at that time. On the other side of the world the widely-hated Argentinian military dictatorship of General Leopoldo Galtieri was experiencing severe economic crisis and widespread social unrest of his own. And to deflect from his domestic problems he did what pressed tyrants have done since the beginning of time - he picked a fight with a foreigner he felt sure he could beat.
Located in the South Atlantic only 300 miles from Argentine shores but 8,000 miles from Britain, the tiny Falkland Islands has been a territory of the UK since it was appropriated from the Argentines in 1833 for its strategic value in navigating Cape Horn. Since this had rankled with generations of Argentinians (as it still does today), Galtieri calculated that an invasion would deflect from his disastrous domestic policies. He also calculated that the UK would balk at the military response required to defend the Islands. The Brits would be vastly outnumbered with implausibly long supply lines and, anyway, the islands were mainly inhabited be sheep.
And America was his new best friend too. Hadn't Reagan just warmly received him as a bulwark against communism in Latin America? Hadn't the administration's National Security Advisor just called him the "majestic general"? Convinced that even if Thatcher wanted to retaliate, she'd be talked out of it by the Reagan administration, he launched a surprise invasion on 2 April 1982. And that morning, Galtieri must have felt pretty pleased with himself. And that morning, Galtieri must have felt pretty pleased with himself. Upon hearing the news, enthralled crowds of patriotic Argentines momentarily forgot the death squads, the 9,000 to 30,000 disappeared "subversives", the daily grind of high unemployment and 130% inflation, and instead gathered outside Galtieri's balcony in a carnival-like atmosphere to celebrate and show their approval of the invasion. His plan was working like a dream.
But the tribal instinct is a part of the human condition, not only the Argentinean one, and the British public were equally thoroughly gripped by the same fervent collective delusion that we call 'national pride.' Galtieri had miscalculated. Thatcher did respond militarily. The British army - though outnumbered - were better trained and equipped than their foe, whom they dispatched within two months. In the national delirium of that rare episode in the terminal decline of what had once the world's largest empire - a national victory - Thatcher's approval rating, like that of her previously despised party, soared (see chart below). An election was called, duly won by the Conservatives, and the painful austerity project was completed in a second term. The rest, as they say, is history.
Thatcher has gone down as the iron lady who turned Britain around and transformed its fortunes. But how different would the story have been had it not been for the "majestic general?" The Thatcher experience shows how fragile support for painful economic policies can be even when the democratic mandate for those polices has been won.
Like the Canadian and Scandinavian austerity experience in the 1990s, the painful programs adopted succeeded as much by luck as by political bravery. And this is what worries me. It's not that I'm ideologically wedded to one side or the other, it's that the precedents just aren't encouraging. The Weberists are right to worry exactly because the Krugmanites are right that the required austerity will be so deeply painful and politically risky. Policymakers won't make it happen, so the bond market will make it happen instead.
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You don't have to agree with a man, or help him, or lend him money. You can ignore him unless he wants to fight, then you have to oblige him or knuckle under.
I agree with you regarding deflation. However, by bailing out the elites (aka banks) the government has virtually guaranteed that the general public will not endure the pain because they have already seen the elites bailed out and will want their own bailout. All carefully planned by the ruling class.
All nonsense! Apple will save us:
http://www.viddler.com/player/9d35e344/
:D
:)
It's not a fair comparison. You're talking about a lesser amount of deflation vs hyper inflation. Have you considered hyper-deflation? See, no one has.
I would think that hyper-D is just as bad as hyper-I, yet hyper-D isn't predicted by anyone, is it?
I kind of think inflation vs deflation is the wrong distinction, anyway, because it overly focuses on the value of the dollar and not the value of what is being traded via the dollar as a medium. It is better to pay attention to the changing rates between what is being traded, say how many silver coins trade for a home or how many coffee beans trade for a pair of leather shoes, than to keep track of the value of what ought to be a valueless rate. However, because so many of us bought the idea that the rate of exchange should itself be traded and now "hold" these rates as dollars, we've lost track of the ball.
It's just a debate about the dollar. If you're trading "outside" of the dollar, then keep your eye on the real rates between real things and let those crazies keep trying to predict the future value of debt based dollars.
Also, deflation leads to inflation and vice versa because they both make the dollar look attractive and ugly at the same time, depending on your position. Deflation encourages people to save those appreciating dollars while burning lenders, so one loves dollars while one the other fears dollars. Inflation makes everyone want to lend and borrow more, but floods the supply.
Right now, we're in a traders wet dream, with both inflationary and deflationary forces going full throttle. Don't mind the turbulence and coming crash landing. In the end, which forces will win? Who cares unless you're still trading dollars?
hyper-deflation?
Never consider it, not sure where it has happened before, but curious.
Hyper inflation implies infinite (or near) quantity of the currency, the currency loses value on a grand scale. Hyper deflation, assuming it means the opposite, means no/few currency or maximum value of the currency which it seems is zero bound.
BTW, deflation (wage deflation at least) is bound by our social structure, minimum wage laws, UE bennies, unions and welfare limit how far wages can decline. Britain faced this in the late 1920s.
sschu
So, really deflation shouldn't be a big fear then because it doesn't run the risk of turning into hyper-deflation, no?
I think our wages have more problems than just the price fixing based on minimum wages. So much of our labor is so overvalued, and, yes, I'm looking at lawyers, therapists, government "workers", anyone who hurts as much as they help yet gets paid no matter. Wages for these "jobs" are way too high. The jobs that add value are more likely to be found in places where labor hasn't been overshadowed by self-servicing each other. Scratching each other's backs isn't the same as putting our backs into it.
If we don't want to see our wages fall, then we better start working. Again, forget about making lots of money and start making lots of stuff. But, I'm rambling now. Sorry, if I'm talking over you and missing your points, it's just me falling victim to self service.
Absurd comment, really. We can inflate to infiniti. We can only deflate to zero.
Zero is MUCH closer...........
You never took calculus, did you?
Whitehouse economist??
Infinity and zero are boundaries of which the curves approach. Going to zero means adding zeros after the decimal instead of before, such as .0000000001 dollars per X under hyper deflation.
Dude, you need to smoke less of that stuff; it's really not doing you any good.
wow, I feel like I'm trying to explain basic math to adults.
Btw, IQ is a statistical measure more apt for studying groups of people and much less accurate the more it is used to predict individual abilities. Perhaps, you are an anomaly?
Violence...the last refuge of the incompetent.
Isaac Asimov
And the first resort of the stupid. lest we forget.
Well, no. most of the successful austerity programs involved either:
- drastic reduction in interest rates, and/or
- fall in currency, and/or
- export surge because many other countries didn't embark on austerity.
Now what do we have now?
A balance sheet recession. The de-leveraging has hardly started. Interest rates are already down. There are few currencies against which to devalue. There are some developing economies still growing but that's not enough to pull the whole world out of recession.
Where is demand going to come from when the public sector embarks on austerity almost everywhere, as you clammer for day-in, day-out?
We know what happens, we've seen that in the 1930s.
The big added risk is a deflationary debt vicious cycle when that happens.
Stick to comments about markets Tyler (you're brilliant at that) and leave macro-economics to the specialists. I'm sick of finance guys with their 2cents of macro comments, the perfect example that a little knowledge is a dangerous thing.
It 1 o'clock. Do you know where your economic Ph.D is?
no, but i am sure i can find another on some street corner somewhere.
Lined up around the street corner, waiting in line for an ipaduh. These economists will save the economy with their consumer spending, come hell or high water. Thank the lord for economists!
Or at the bus depot
It's the first round, and apparently you have no arguments left, then.. No surprise there. There ARE no arguments. Ask the Irish, Estonians, Latvians. They embarked on austerity with the rest of the world still expanding (so a more favourable scenario to yours). Just look at the results. Now you want the whole world to embark on austerity. What do you think will happen?
If you slam the Keynesians day-in, day-out, at least use arguments. It's anything but self-evident, as you seem to assume.
First and last. And you are totally right - there are no arguments. The Spanish inquisition tried the whole reverse-argument approach to devastating success.
Well, now, I didn't expect the bloody Spanish Inquisition!
No-one Exp...Never mind.
AHA!
Our two weapons are fear and surprise...and ruthless efficiency...
And the comfy pillow! No one expects the comfy pillow.
You must be one of those jokers we used to see on tv everyday. Don't worry Estonia won't start any war, I'm not sure about Latvia with their potent army.
Estonia won't start one, but they might volunteer to fight someone elses. They have been bending over backwards to get into NATO for years.
Bending over backwards is not how you get into NATO. It's bending over frontwards that's acceptable. Common mistake.
"The big added risk is a deflationary debt vicious cycle when that happens. "
What you call a risk, I call an oportunity on so many levels, for so many Nations.
It will be glorious.
Epic.
Do you like real butter on your popcorn?
where are these great rebel warriors you all speak of that you will be sitting back watching while eating your popcorn?? the vast majority of the sheep will go silently to their tent cities and slurp their gruel.. have fun watching that
I was thinking more like comedy night. I like popcorn for watching funny movies. I don't like to eat anything while watching fights since it totally distracts from the bigger enjoyment.
Cheers.
Deflation = an end to fraud
Deflation = a purging--a scouring--of the system
Deflation = the end of false idols and the diminution of their priesthoods
Long live the Deflation!
Keynes didn't advocate stimulus when the equity section of the balance sheet was deep in the red. Book debt to GDP is 370 % in the U.S. Much worse of you can't the off balance sheet debt. Keynesian stimulus is suicidal under those conditions.
I crap bigger than you.
"I'm sick of finance guys with their 2cents of macro comments" I know, almost as bad as those academics who claim to understand the real world
When a finance guy gives you his 2 cents worth, you might want to look around to see where he borrowed or stole it from before taking it.
Last time I took 2 cents worth from a finance guy, it turned that the 2 cents was highly leveraged and its loss took down the Lehman empire. So now, I'm more careful.
Right here. I thought that was you. No?
Look for a dirty bum with a tin cup, seventh and park. Throw him a dime and hold your nose as you walk by...
Krugman's a Ph.D, isn't he? LOL
I think the point is that the government spending didn't provide the juice it was supposed to... so the answer is to do more of it? But wait, you'll have to come up with a justification that is politically viable (as in, the public will go for it).
True, cutting spending would tank the economy worse than what we're dealing with already. Also true, this is just what happened in the 30s. But, what if it doesn't work, again? Then what? Keep doing it until either you can't anymore or until it starts to look like it's working? I think that's not wise, because even if we try to government spend our way out of this, what politician/bureaucrat is going to take away the punch bowl at the right time? And isn't that what caused this whole mess in the first place?
We are in a shitty conundrum. So war will likely emerge as the best justification for the level of spending the interventionists seem to advocate. It's ironic, because most Keynesian types are by nature sort of peacenick. And it will be their own philosophy that leads to war.
Finally, the "you finance guys" rhetoric is in my view unnecessary. It doesn't add to the discussion, and only serves to make you look like an economics buff who knows what we should have done 80 years ago.
Joe, the pea is in the middle. They haven't spent but just under half of the "stimulus" but roads will be torn up all through the summer. Other half is to ramp into the election as slush.
If you think it ironic, it would be worth your time to look at the actions (and writing and private words) of the types who are Keynsians vs. the public words. Keynsians==central authority==for the good of the people!=individual liberty. Cf. Wilson and internment of AMCITS of German heritage in WWI and Rosevelt same with Japanese (we all kinda' know) but also German and Italian. 442 RCT and the crap that they chewed to compensate. Look up segregation of the U.S. Army when/how it happened.
</Rant>
- Ned
You have to look at it from Krugman's and Obama's perspective: For one thing, they didn't spend nearly enough in the 30's, and for another "they" weren't "us," and all will be ok because "we" are the ones we have been waiting for. "We" will do it right this time around.
"Stick to comments about markets Tyler (you're brilliant at that) and leave macro-economics to the specialists."
Do you mean all of those folks who failed to see the economic mess that we're in now? And missed calling the biggest event of their careers?
So why should we put our trust in people who are demonstrably clueless and incompetent? And apparantly hopelessly so?
How badly do they have to botch things before you get a shred of a clue that they have absolutely no idea of what they're talking about?
I love it. Over 12 hours later, and not one PhD Economist can defend themselves against the obvious fact that they haven't a clue as to what they are talking about.
I suppose that's understandable. Missing the biggest event in your career is spectacularly embarrassing.
In real scientific fields, when theory doesn't match reality, they usually go back and try to figure out where they went wrong. And come up with a new theory which matches the results.
But not so with these PhD Economists. Rather, they choose to stick their heads in the sand, and ignore how the world really works. What's really sad is that this isn't the first time this has happened.
Until this behavior changes, and Economists stop using fatally flawed theories, they will remain a band of idiots. Demonstrably and dangerously so.
On the bright side, those who recognize these fools for what they are can make some very good money.
Specialists are just narrowed minded, self glorified clowns with too much lipstick who have forgotten how to think outside of their circle-jerking click.
I don't know if I believe that, but the whole telling others to stop thinking and to just listen to the experts totally deserved a back hand.
He's correct, it is a balance sheet recession. What he and his macro-economist buddies fail to grasp is that you can't get out of a balance sheet recession by transferring liabilities from one balance sheet to another indefinitely. Most of these guys probably slept through Accounting 101.
Economics isn't hard, central planning is.
Another bullshit article by a banking elite touting the virtues of austerity for the mases now that Grice and his kind have been bailout wholesale by the very government he wants to condemned.
Of course bankers want money to contract
Let me ask Grice what kind of sacrifices does he personally plan on pursing for the the sake of austerity?
DR
Grice will sacrifice in the following manner: (standing over a prone victim held by his banker buddies in black cowls ornamented with inverted crosses), O great lord of darkness, please accept this taxpayer sacrifice...
Since it's not possible to "fix" America's many structural problems, nor its unbelievably high debt, the political class and the Power Elite feel that war is the only solution.
What is it about war that is the solution? Increased spending on war materials? We already have two wars that were going on while the economy tanked. If war is the only solution, what happened there? Perhaps it was the scale of the wars that was not sufficient. In that case, war is not the solution. More war maybe is.
We need more war?
We need more cowbell.
More Cowbell? As ordered, Sir:
http://www.youtube.com/watch?v=miEySYXuq3g&feature=related
<break genuflect>
Hmm, a brace of junks... not many Tones On Tail fans on ZH I guess. Noted.
We need more asshats.
Yes
Man is a stupid idiotic beast and tends to repeat the same mistakes throughout history.
Actually, I cannot say it better than this, of course:
http://www.nytimes.com/2010/07/02/opinion/02krugman.html?_r=1&hp
honestly, I think somebody needs to hit Krugman over the head repeatedly with a decaying whale penis until he is super fucking dead - the problem is that some people listen to him and I think he's doing us all harm
if he deserves a nobel prize for putting this kind of nonsense out there, then I deserve a nobel fucking prize every time I take a shit
ope, speaking of which, I feel another nobel prize coming on - must have been that taco bell - be back soon ZH'ers
Yes, you can call him anything you want, you can ridicule him, wanting him dead, you can do all sorts of things and you're doing it.
Except, that is, show where he's wrong.
Tyler cannot even muster a single argument. You can't either.
Perhaps that's why you resort to these kind of posts?
Pretty lame stuff. I wanted to have a rational discussion, but it needs two parties to discuss...
FIAT is not real. There.
Paul, is that you?
Hey go stand over by that fire hydrant, let me get a 2-fer-1.
uh oh scoob! The man that we thought was Mr. Paul Kkkrugman is actually the evil grounds keeper! So he doesn't actually know economics at all! And here for a minute I thought we were all doomed; good thing we caught him! Time for some scooby snacks!
Not for the faint of heart:
http://27.media.tumblr.com/tumblr_kvcqxx7OnS1qzlcuto1_500.jpg
"But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off." - Paul
that's the only thing austerity argues?
"Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems."
right again Paul, compounding debt and transferring bad debt to the public has little long term effect
Just throw money at our structural problems, that'll fix everything. It will make your children debt-slaves, but f*ck 'em that's their problem. Of course if you print a really, really large amount China may stop participating, but that's okay 'cause the Fed can buy it back through the back door. The national debt is just a number anyway, no one's big enough to collect on the good ole USA.
And a quote from stooge Greenspend to boot!
See my post above, stpoic. Walk us through exactly how the intervention will, in the real world, work on the up side? Everyone's a Keynesian in a collapse.
UCLA does not really teach that.... Get back to him after the dust settles from this collapse.
I'm quite rational, I assure you. I like to post hyperbolically because it's fun. And because the idea of somebody hitting Krugman with the decaying giant phallus of an aquamarine mammal makes me laugh, so nyah, nhay-nyah, nyahhh nyahhh....
Now, that I am done being lame and irrational, I shall make my case. The bond vigilantes are not imagined - they are very real. See PIIGS et al. for a perfect example.
There are several problems going forward that I see. First of all, and my major concern, is that we don't know what the "tipping point" is. We can keep flogging the nag that is our economy, who is already foaming at the mouth and gasping for air, but at some point, she will keel over and die. Only problem is, we don't know when that is, but it is definitely not only a possibility, but given our current fiscal trajectory, an inevitability. Second, when the nag keels over and dies, it does just that. It doesn't give us much warning, and when it's made up its mind to quit, it does so in a REAL BIG HURRY.
Also, the increased Federal borrowing crouds investment out of the private marketplace. When you can borrow at 0%, and lend to the Federal Government at 4% or higher with massive leverage and zero principal risk, why do anything else.
Third, increased regulatory uncertainty due to the flailing about of a capricous and arbitrary government disincentivizes private investment.
Fourth given all of these things, why would foreign investors want to hold or put money in dollars as currency holdings, or in the form of FDI or securities purchases when they face incredibly serious currency risk by doing so?
Fifth, at our current pace of borrowing, it has to be paid for in some way - i.e. higher taxes. We already have the 2nd highest corporate tax rate in the world, and I believe that is a drag on our economy.
Here's the bottom line - the federal government produces nothing of "value". They are funded one of two ways - either through borrowing on a credit card that's getting near it's limit - or through the taxation of private individuals and enterprises. If you want less of anything, you tax it. The borrowing is in and of itself an indirect tax because of all of the aformentioned reasons, and it leads to more direct taxes. The American people have a (and I might get a little racier here) a giant fucking tapeworm - a parasite that is the federal government with it's confiscatory levels of taxation. You don't get rid of a tapeworm by making it fatter and bigger. You starve the fucker or excise it outright. Let's not pretend that government is the solution. Government is the problem.
It's the Federal Government that has ruined the prosperity of the American people by devaluing the purchasing power of their currency by 95% since the turn of the last century. That is why people can't keep up. And we want to make this gi-normous blood-sucking parasite bigger??? Not only is it offensive - it is 100% illogical.
Last point - you cannot borrow yourself to prosperity - period. end of sentence.
["Here's the bottom line - the federal government produces nothing of "value"."]
Not even going to comment on that one, the idiocy speaks for itself. You only have to look at the failed states in the world where there isn't a functioning government to speak off. If you're right, these should be terribly rich. I guess the concept of transaction cost doesn't ring a bell.
I guess the stimulus didn't work in China. Or in the 1930s. I guess the austerity is doing wonders in Ireland, Estonia, Latvia..
The PIIGS are in such trouble mainly because they cannot devalue and they lost competitiveness vis-à-vis Germany and other core EMS members the last 10 years, so they can't inflate their way out of debt either (even if they had their own monetary policy).
My question remains. Where is the demand going to come from when all governments embark on austerity, with a private sector de-leveraging, with interest rates already rock bottom, with no currencies left to devalue against.
We know how that ends.
You act as if demand will drop to zero. There will still be demand there, but not as much as was there 3 years ago when we were all rich. Now that 20% of us have free housing compliments of another 20% of us, the question remains of when & where the other 60% are going to get theirs and who is going to pay for it.
There is no nice or easy way out of this. If austerity is not taken seriously, the only ways out will be inflation, expropriation and vague "emergency measures" to restore the order.
stpioc-here goes. Posit: Economics as some kind of science or other; thus, counter example brings into doubt the original thesis.
Federal Gov't produces nothing of value: please advise what they produce. (I'm Jeffersonian in this arena. Strong defense, enforce property rights, rule of law are all a framework for production, so it is OK to skim the system for the benefits provided to the system.) Don't know what they produce.
I know that the stimuliiiiiiiiiiiii didn't work in the 1930's, so did Henry Morganthau:
“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong…somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises…I say after eight years of this administration we have just as much unemployment as when we started…And an enormous debt to boot!”
Does history repeat itself? Yes, it does. And there is every appearance that the White House and the Congress intends to repeat many of the errors of the last Depression that came to be known as Franklin Delano Roosevelt’s New Deal. See e.g. (but this is well sourced)
http://collectingmythoughts.blogspot.com/2009/02/sourcing-morgenthau-193...
http://www.cnsnews.com/news/article/41784
And on "fundamental change:"
http://quotes.liberty-tree.ca/quote/henry_morgenthau_quote_1c65 on the new world order
Root cause for the PIIGS goes further back than can't devalue today because of EuroZone rules, goes back to their culture being incompatible with their obligations as members of EUZ. Milton Friedman wins another round here.
My counter question: if the government spending route is so effective, then how come we all can't go on the dole? I can count to 99, then maybe start finding other ways to scam.
Answer to your question (short version): Stop the spending, readjust, back at it. Can't be done? Try U.S. 1920 recession for example (and counter example of 1929 et seq. and 2008 et. seq.) It is all about the (wasted) spending.
But it can't be done, not with this bunch in charge (and there is only one bunch in charge).
Remember, the TARP had to be passed in a panic, because if it wasn't passed overnight, unemployment might go up to 8%. That was your line of reasoning at work. (actually, it didn't work, now did it).
- Ned
stp, is this you?
http://shareholdersunite.com/2010/06/29/ireland-austerity/
PS That is why I think Krugman is a giant fucking douchebag. And his level of "education" and credentials don't hold shit with me. Why we continue to listen to these "learned individuals" I have no idea. I will say one last thing - I am incredibly grateful to have a forum like Zerohedge where the real truth can be explored and debated by market participants, instead of listening to some Princeton fuckbiscuit who pays more attention to theory than to reality.
a douchebag made from a whale penis. Now that's ironic.
To whom should we listen then?
To "un"-learned individuals like yourself, not hindered by any knowledge, rational argumentation, or facts, but somehow "know" when they see the "real" truth?
Great solution!
Still nobody actually putting any argument against what Krugman actually wrote. If he's such a "douchebag" as you claim, that should be easy, right?
Not even Tyler tried...
What does that tell you.
"unlearning" a lot of what we've been told is the first step
Krugman regularly writes articles in the NYT about the horrors of global warming; he recently published an article with a list of scientifically verifiable points that "deniers" shouldn't be debating; every one of them was easily demonstrated to be false. I mean, in a half hour, anyone of you could find out that every point he listed is a non-fact; not a part of reality, didnot happen, etc. IMO this individual is a madman.
stpioc,
Where to begin?
"No one should expect that any logical argument or any experience could ever shake the almost religious fervor of those who believe in salvation through spending and credit expansion." Maybe I am wasting my time with you.
"Credit expansion is the governments foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous." "The essence of Keynesianism is its complete failure to conceive the role that saving and capital accumulation play in the improvement of economic conditions." Credit expansion out-competes capital, this is problemo numero uno. You and Krugman fail to understand that debt does not equal capital, the one cannot substitute for the other.
Of course if one could, we have ""If it were really possible to substitute credit expansion (cheap money) for the accumulation of capital goods by saving, there would not be any poverty in the world." But we can't and, therefore, there IS poverty in the world.
"A policy of deficit spending saps the very foundation of all interpersonal relations and contracts. It frustrates all kinds of savings, social security benefits and pensions." No one invited you into my kitchen, so get out.
"True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression." Austerity will not bring about depression, the credit expansion already did. The question is: do you extend and pretend a little longer by making my children debt-slaves, or do you say WTF...let's get it on now.
"If the credit expansion is not stopped in time, the boom turns into the crack-up boom; the flight into real values begins, and the whole monetary system founders." Sound familiar?
"Inflation and credit expansion, the preferred methods of present day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer." Robbing Paul to pay Peter does not create wealth. (Or is it Peter who is robbed and Paul who is paid?) Apparently from the above post you will never understand this one.
"Keynes did not add any new idea to the body of inflationist fallacies, a thousand times refuted by economists… He merely knew how to cloak the plea for inflation and credit expansion in the sophisticated terminology of mathematical economics." The plea for inflation and credit expansion went over well, he is considered the most influencial economist of the last century. Never, ever bite the hand that feeds.
"What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse." Austerity is used to shorten the end time, not extend and pretend.
"An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself." What you are currently witnessing.
"If the practice persists of covering government deficits with the issue of notes, then the day will come without fail, sooner or later, when the monetary systems of those nations pursuing this course will break down completely. The purchasing power of the monetary unit will decline more and more, until finally it disappears completely." That means zero, Bithcez!
Clayton Bigsby,you probably didn't do very well in school or at the university, judging from your comments. No wonder you don't like academics.
stpoic...If you've ever done chemistry titrations, you would know that the reaction obtained is similar to what happens when the printing presses let too much cash loose.
O.K. You asked for it:
You can't solve a debt problem by taking on more debt.
Q.E.D. (And I don't mean quantum electrodynamics)
Your mom can muster an argument.
Winner!
KRUGMAN: my favorite fire hydrant.
My friend Triumph the Insulting Dog says "he poop on Krugman".
http://www.youtube.com/watch?v=pnip1hYpUYc
Well, maybe you could get semi-permanent unemployment insurance through Congress if most of those folks become part of the army. Six million would make a respectible army.
You mean like a Praetorian Guard?
Dude, your scaring me!
No. The CCC. They did that during the Depression. It was better than letting a whole lot of hungry, angry people walk around without a purpose.
A lot of the American population wouldn't pass the field exercises in Basic Training. The only thing they'd be good for in the real Army is as cannon fodder.
The possibilities are many. Grenada.. No, Reagan did that. Venezuela? Easy move there. They even have oil. Mexico? Hmmm. Do we really want to be any more responsible? Besides the oil is running out. Canada might be better. El Salvador, Panama, Guatemala? Been there, done that. Keep it in mind though. Iran? Haven't we learned that lesson yet?
Austerity = pay the bankers back in your blood, flesh, property, and daughters for the fake capital they lent you that they never even actually posssessed.
That's the first time I agree with you.
You disgusting, irritating, giving me the finger, arrogant, convoluted logic, argumentative, smiley face.
Nah, just kiddin, nice post, well said.
I find it riveting that "they" (sorry, trite I know, but "we" is so 2008) create austerity measures while maintaining interest rates at zero. This is going to be one hell of a meltdown (meltup? <sigh>).
This is so ugly, and no, there are no good solutions. This as long as we continue to think in relation to the given system. If we continue to accept the paradigm of FIAT monie (credit/debt) then we will further our awkward trip into a black hole; this instead of a useful trip down the rabbit hole.
Black hole scenario:
While squabbling over a few trillion of debt here and there (when the overall debt is in the hundreds of trillions) law givers cut pensions and fire useful teachers/policemen/firemen/etc (I do not like the system, but having a sheriff, even by default, is going to happen....a hero always emerges at the end of the day...and yes our public education system is deeply flawed, but even if we were to scrap it, there would be teachers-subsidized or not). This as we continue to mount debts of monumental proportions (ZIRP), that we will never pay back; any debt at this point will create dead weight on the monetary system. Throw in the fact that it is all absolutely fictional in the first place and you are looking at the greatest game of make believe the world has ever known!
This is like planning an expedition to conquer Everest on a time line of 5 years, and not bringing food for 3 months. "Don't worry, we will drop food from helicopters along the way." BS!!!!
To add fuel to the fire, we will have taxes raised. This will crush any chance of a recovery (for the middle class). And why are we having taxes raised? To pay back the Federal Reserve Bank. Why are we paying back this bank? Because we asked them (did we? Ok, our law givers did....but only with minimal protest from the status quo) to loan us some cash. Now the crux.....first, the federal income tax is unconstitutional. Taxes must be apportioned. A tax on labor is nothing of the sort. People must work, we have no choice. Work is not supposed to be taxed, end of story. This is where the Tea Party is right (get us home you f***ers!!!!! We are on 2nd and we can wheel!!!! A single brings us home! Hit us home!!!).
I also now want to bring up that the oilgarchs (not elites...nothin' elite about them!) are bumbling lunatics. They are panicers, drenched in gasoline, and they know that a spark will light a fire that will lead them to ruin. You see, they have had it easy for the last century and a half, and we went along for the ride. But now that oil production has peaked, they will no longer control the life blood of the economy. Thus why they collapsed the system when they did. I also think they are scared of solar flares, and other natural disasters ruining it for them in '11 and '12.
So here we are, and there they are (sorry to divide them from us, we are all one, but really it is they who divided us up.....if anyone has a way to contextualize "us", "them", etc without creating feedback let me know....we need this worse than anything....this to show that we are responsible for their mess, even though it was not our fault....it is circular, which is frustrating, and also the reason we can not leave the paradigm. I mean, my solution is for everybody to buy silver, but that may be too simplistic, and in order to do that, maybe people have to wake up to the paradigm itself)....sorry, here we are; they contemplate war, and we just want our livelihood back. We need to end the system NOW, and march NOW, because if we do not, they will take it there. They have no solutions, only problems. And when it is problem after problem after problem, well, we have a problem.
If the next problem is war, that is endgame. I am not even sure a WWIII is possible; how can anyone fund a war at this point is beyond me!
Rabbit hole scenario: The spirit is metaphysical. Nature is all knowing. We could once again be symbiotic with it. Imagine the possibilities.....
Oh and we might have a flash crash coming into the close.
Great post, LH! There’s got to be a new deal—the Fed’s corrupt system of finance, its “cursed net of bankers all over the world like a spider’s web,” “this game of make believe,” has got to go.
Thanks.
Canada? No need. Purchased long ago. Ask Harper the current broker.
Can I get anyone a drink?? Hot towel?
Surely there are enough wars going on currently for the US machine ? But if not, then please come and have a pop at the chav masses in the UK. Its enough to make one think Europe is the cradle of civilisation after all...
The problem with the cradle of civilization thing is, that that's only a beginning. After that you need to grow up and get your shit together and act like a responsible adult.
With two wars raging already, you want an another war? I doubt that. West is indebted up to the ears and wars are way too expensive these days. I think we´ll see a massive QE 2.0, and that on both sides of Atlantic. (perhaps even Pacific - China, Japan etc)
Well, take a look at the map.
If the apartheid occupiers of Palestine draw the Sotero administration into war with Iran, Uncle Sam wins.
Tic-Tac-Toe
Then it won't be 3 separate wars - just one hella-big one.
Until Venezuela and Bolivia get involved (to defend Iran).
Wage inflation in China?
"As many as 100,000 students at a vocational school in the central Chinese province of Henan have been 'ordered' to work for Foxconn, the giant electronics manufacturer that has been plagued by a wave of suicides." - http://www.telegraph.co.uk/finance/china-business/7868470/Up-to-100000-students-ordered-to-work-for-suicide-factory-owner-Foxconn.html
one needn't consult a psychic to see the way things are headed. . .
This really isn't as bad as it sounds as it will help reduce the average class size of 15,000 students.
True story; coming to a Wal-Mart near you, soon.
short answer: absafrickenlutely
I think that oil discoveries/production in the North Sea helped Maggie quite a bit with Great Britain's inflation problems. So, oil and war/war and oil. Interestingly, I found this gem about BP:
"The UK Continental Shelf Act came into force in May 1964. Seismic exploration and the first well followed later that year. It and a second well on the Mid North Sea High were dry, as the Rotliegendes was absent, but BP's Sea Gem rig struck gas in the West Sole field in September 1965.[4] The celebrations were short-lived because the Sea Gem sank with the loss of 13 lives after part of the rig collapsed as it was moved away from the discovery well."[
http://en.wikipedia.org/wiki/North_Sea_oil
Spot on.
Also the subject of a moderately good Jethro Tull song....for weekend listening
it's iran people. thats obvious. its same as iraq lead up. what else they gonna do....
Agreed. It's not Venezuela. We can't afford any more screwups in Latin America with China making a play for all that mineral wealth and the late great futbol power BRA-ZEAL! listening. Besides, when we capture oil wealth we give it back (see Gulf War 1 and Gulf War 2). So it's Iran. Ideology trumps economy if you want to get the people worked up. Just wonder what the "event" will be to stoke the righteous rage of the peeps.
It won't be Venezuela, but it could become Venezuela.
When Comrade Chavez is forced by events to pick a side, he won't cower before the big, bad, naked Emperor.
Lula, on the other hand . . .
iran and usrael then ww3 its written on the cards
Wait. Don't We already have two wars? Got Dubya through.
Hope&Change was supposed to end these.
Oh. Need a New One.
War!?! You want a war?!?
http://www.youtube.com/watch?v=V8lT1o0sDwI&feature=related
Austerity, oil spill, internet censorship, Blah blah blah, just get the damn war on with and let's gt this shit behind us already. We all know we're fucked, the government and the financial system have screwed us all and there is no way out (as history tells us) other than war, so friggin get on with it. I'm tired of this shit and the lies that come with it. It has gotten so bad that those with less than a GED education are wising up to this bullshit, yet the lies keep on rolling in. Amazing.
The funny thing is, India is our 'natural' ally yet we spend all our time with Pakistan and China. Like looking for Mr. Goodbar in all the wrong places. Stupid.
If we are only patient and set a good example (hahahahah yes a foolish notion) than Iran will also be a key ally. We have a lot in common.
It is the European powers, not us, that need a 'good war'. Land war in Asia = bad; wars over little islands = good. Thus.....crystal ball please....Corsica??? Come on, you (shakes crystal ball)....how about Cape Verde? Close to W African oil, an easy sail from NATOland...yeah.
War anyplace BUT Cape Verde would be...well, stupid. But there you go.
Gilligan and the Skipper are quaking in their shoes about now...
you know that eventually stpioc will get his wish, what with the bunch running DC right now.
i know they wanted to wait until after the mid-terms to spring it, but I think they aren't going to be able to hold out that long now. Unwanted QE and future depression is the lesser evil than is depression now.
Grice missed it; Thatcher’s popularity soared on the sovereignty issue. And, in all probability, those 364 squealing-with-pain economists wrote because the welfare people were screaming; Thatcher probably was going to tax them and cut their government programs. Can you imagine our “former and future Nobel Prize winner” economists “decrying” the Democrats' on-going plans to raise taxes on the “rich,” i.e., anybody making $100,000 or more? You can’t find one who’d complain about it. You’d have to go down to the Mises Institute and look under the desks!
When I think of austerity I think of people willingly, out of necessity, pulling up their bootstraps and cutting spending when the rubber hits the road. As for people not supporting austerity in government, I don't believe it. Why is it that Governor Chris Christie of New Jersey is so popular? Why is it that the majority of Americans want Obama’s drunken spending ways checked? At the same time, who is it that’s screaming over the disadvantages of cutting open-ended unemployment “benefits,” reducing exorbitant public sector compensation, downsizing welfare programs, stopping war expenditures, …? Why, it’s the government-connected, Keynesian economists…
If “austerity will be the catalyst for war,” it will be for a revolt--at home. This banker-run, self-serving, gluttonous, out-of-control, illegitimate government steals, spends, and destroys, and then sends us the tax bill. And wonders why its victims, in their rags, aren’t happy! It’s time for another Declaration of Independence!
_______________________________________________________
KEEPING THE WAR FAR FROM HOME By Russ Baker on June 27, 2010: The other day, I received a press release about an upcoming event. The release had been forwarded to me after the event, and, since I found it compelling, I wondered how much media attention it got. The answer in a minute….
But first, the release:
That’s bad enough, but what really got my attention were the following statistics:
Ok, so how much coverage did this protest get—or the relevant and moving accompanying statistics? Answer: None at all. Nothing. Nada. That, in short, in the state of journalism today: Keeping the war far from the home front.
Unfortunately, the next war could be on the home front!
I guess they didn't get their funding from the right lobbyist.
"One, two, three, four! We don't want your fucking war!"
http://www.youtube.com/watch?v=rq3AC7eyBRs
"Honor the warrior, not the war."
Taiwan just signed a trade agreement with China.
Mexico the next war crisis?
“21 people dead in Mexican gang shootout near border in Mexico”
Man, their getting closer every time....I guess their coming for California..
I'd concede California, so long as they agreed to keep Pelosi, Frankenstein, and Boxer. Come to think of it, they can keep that girlie-man Schwarzenegger, too.
DR--coming to a national forest near you.
http://www.foxnews.com/us/2010/06/18/federal-lands-arizona-travel-warnin...
(and don't worry, I'll pull up a CBS "fake but accurate" account too if you'd like).
- Ned
Seeing as Uncle Sam already took it from them, I suppose turnabout's fair play.
Maybe it's time for the thieves to return Atzán to its rightful owners. 160 years of 'stewardship' is enough.
If there is still anyone out their in municipal bonds ...
stpioc--a Keynesian and Krugman fan--owning ZH? Who would have thought?
Still no convincing counter argument to his stance has surfaced.
Assured depression today vs. possible depression later. Is that really a hard choice?
Austerity is for banker-shill peasant chumps. Austerity is only for poor folks.
We all know that fiat is fake, so why should we have to suffer our standard of living.
Print till you can print no more and then global jubilee, best of both worlds, no austerity and no depression.
ned countered well. (read entry above)
How many of those anti-Krugman financial experts were yelling 'stop the spending' in 2005-2006 on CNBS every time that Mozilo or Franklin Raynes told us how much they grew their balance sheets. I didn't hear Rick Santelli then!! Oh wait, they all became Phd economic majors and figured out that debt is bad, really bad.
We need austerity so the government can use FICA money to repay all those loans that Mozilo and Frank Raynes made.
If they try this tail-wags-the-dog thing, where they use war as a distraction again, I hope the voters punish them (hahaha - fast chance, eh?). As Mencken said:
Democracy is the theory that the common people know what they want, and deserve to get it good and hard.
On a positive note, as of late, when Israel advocates like C. Krauthammer, W. Kristol, T. Friedman, D. Frum, Wurmsers, J. Goldberg, Marla Singer, Ilya Ehrenburg...(oops, sorry that one is dead) inter alia., start hysterically pumping up war propaganda for fun, profit and Zion, you can take them as a contrary indicator of actual war. To quote Metternich in a different context, war with Iran now would be worse than a crime, it would be stupidity.
Don't forget Ariel 'the human veggie' Sharon.
He's in a hospital somewhere, drooling to death between hell and apartheid.
Yet he still wants to murder more Palestinian babies.
Austerity won't kick in (at least not until after the Nov. elections). Infact i wouldn't be surprised to see things not happen before 2012. I think Obama will not run for a second term (unless some amazing economic turn around occurs). His handlers will have squeezed all they can out of him by then.
play it again, uncle Sam,
frankly my dear...
War! Uh, what is it GOOOD for?
Well, actually:
* It thins the herd.
* Generates lots of heroic bullshit stories that heroic males pass on to their (soon to be heroic) male children, perpetuating the cycle of heroic stupidity.
* Increases the GDP (by breaking lots of windows).
* Bonds the dumbasses together in a nationalistic spirit.
* It's the best loved sport that ever existed.
George Carlin...We like War.
http://www.youtube.com/watch?v=sDkhzHQO7jY&feature=related
Celente, Keiser, and Chapman all on Jones today.
http://www.youtube.com/user/fairinfowar#p/c/33721B09148510F1/4/yCImyGCiPEs
Thanks for the link. I normally wouldn't listen but that whole show was just great!
And Bill Still the creator of "The Money Masters" and the new "The Secret of Oz" was on as well.
Geithner Rushes to Sabotage German Derivatives Ban; Schäuble Prepares New Moves Against SpeculatorsThe German government is now fully committed to escalating its ongoing counterattack against international financial speculation. These moves represent an historical watershed as Germany becomes the first major economic power to roll back the tide of financial globalization, under which crackdowns on hedge funds, derivatives, and the world gambling casino were branded as taboo for national governments. German Finance Minister Wolfgang Schäuble has announced that the Merkel government is sending a draft bill to the German parliament (the Bundestag) targeting “turbulence” and “volatility” through further regulation of “certain transactions [which] amplify the crisis.” The bill reaffirms the most fundamental German measure enacted so far, the May 18 blanket ban on all naked credit default swaps issued against the treasury bonds of the eurozone nations. This ban represents the most aggressive move anywhere in the OECD against these most toxic derivatives, which have figured prominently in the AIG bankruptcy and the recent Goldman Sachs Abacus scandal. They are also the derivatives being widely used by hedge fund hyenas and zombie banks to attack such nations as Greece , Spain , and the rest of the Southern tier of the euro.
The naked CDS ban protects euroland government bonds, To that would now be added a ban on the naked shorting of those Euro zone government bonds themselves. This means that a speculator wishing to sell a Euro zone government bond short must own that bond in advance. This makes speculation more complex and expensive, and is all to the good.
Schäuble’s new measures also expand protection for certain stocks and for the euro itself. The draft bill would outlaw naked shorts of all German stocks, meaning stocks whose primary listing is at a German exchange. The original May 18 package had banned naked shorts against a list of 10 large German banks, insurance companies, and reinsurance firms. The obvious next step is to ban naked shorting of stocks altogether. From now on, speculators who wish to short German stocks must own those stocks before they sell, making it more difficult and costly for said speculators to operate. The new draft bill would also outlaw the naked shorting of the euro itself in the foreign exchange markets. The Bundestag needs to approve this bill on the fast track, and then do more.
Tiny Tim Geithner’s US Treasury is attempting, but not succeeding, to conceal its apoplectic hysteria over the German ban. Geithner announced that he was flying from China to Europe in order to confer with George Osborne, the new Bilderberger Chancellor of the Exchequer, and Bank of England boss Mervyn King in London, followed by consultations with European Central Bank chief Trichet and Bundesbank leader Axel Weber in Frankfurt, followed then by a meeting with Schäuble in Berlin. There was no doubt that the overriding purpose of Geithner’s mission was to sabotage the German moves against derivatives in particular and speculation in general.
An unnamed US Treasury official speaking off the record on condition of anonymity told Dow Jones that the German ban on naked credit default swaps was “damaging to the market and counterproductive.” The band was “one-sided,” he added, making clear that Geithner & Co. did not expect the German ban to be adopted on a large scale. Geithner was evidently deeply concerned that the German ban might be imitated by some of Germany ’s closest economic partners, including the Netherlands , Belgium , and Sweden , as well as by other nations much farther afield. Who was the anonymous official? It might have been Tiny Tim himself, or it might have been Mark Patterson of Goldman Sachs, Geithner’s chief of staff and chief lobbyist for carbon offset boondoggles.
Spain is an example of a country which would have been very well advised to join in the German measures when they were first proposed. Observers have noted with some astonishment that the self-styled “socialist” Zapatero of Madrid is unable or unwilling to embrace the measures against the casino economy which the center-right Christian Democratic/Liberal government in Berlin is actively pursuing. The explanation is obviously that the Socialist International as a whole (with figures like Papandreou of Greece and Socrates of Portugal, as well as Zapatero) is acting as an abject puppet of the financiers.
Spain is now paying the price for its inaction through an incipient banking panic emerging on the weekend after the German ban was announced. The Caja Sur, a savings bank representing about 1% of the Spanish banking system, became insolvent, quickly followed by eight banks over the next three days. This meant that the hedge funds had succeeded in spreading the Greek contagion, thus raising questions about the short-term survivability of such overextended speculative operations as Banco Santander and Banco de Bilbao. The Spanish parliament approved a draconian austerity program by a single vote, offering the lunatic spectacle of a country already mired deeply in economic depression, with an official unemployment rate of 20%, embracing its own self-cannibalization with a deflationary austerity program in the vain effort to regain the confidence of international financial markets and investors. Spain needs to understand that there are no “markets” today, but only oligopolies and cartels. They need to understand that they are dealing with ruthless speculators, and not with investors. They might as well try to regain the confidence of Bonnie and Clyde , Dillinger, and Ma Barker.
Another country that urgently needs to join the anti-derivatives front is Italy , where a large-scale debate on economic populism broke out on the weekend after the German ban. The financiers Franco Debenedetti and Paolo Savona, camouflaged amidst a group of free-market quackademics, are desperately campaigning to convince Prime Minister Berlusconi to maintain the sanctity of hedge funds and derivatives. My answer to these market fetishists appears below. Berlusconi is moving in the wrong direction on draconian austerity with the €30 billion package of cuts which he has presented to the parliament. If this is all Berlusconi has to offer, the Italian economy is in danger of entering a death spiral in which tax increases and cuts to spending and public services inevitably cause rising unemployment, falling real production, and constantly lower government revenue receipts. Berlusconi should concentrate on suppressing speculation and on launching a recovery program, not on austerity.
Reactionary commentators around the world continue to parrot the line that the great crisis is a crisis of the welfare state,” and spells the doom of any and all government measures designed to defend and secure the health, education, and welfare of their respective populations. The Greeks, we are told, are “profligate.” This legend of the profligate Greeks conveniently ignores the fact that Greece is the second poorest nation of pre-1990 Europe – only Portugal is poorer. The Greeks have 18% official unemployment, with 20% of the population living below the official poverty line. The average Greek office worker earns about $1500 per month, or barely 40% of the wage level of their German counterparts. And the average pension for Greek government worker is about $750 per month. This is hardly a king’s ransom. Greece is also an example of one of the peripheral countries where the depression first began to hit. Greece is heavily dependent on tourist revenue, which began to decline sharply in 2007 and 2008 as the world derivatives panic began to lash Germany and northern Europe , spelling fewer foreign visitors on the Acropolis and on Mykonos and the Dodecanese .
The pro-financier ideologue Robert Mundell, speaking in Warsaw , has voiced his evaluation that a restructuring of Greek government debt is now inevitable. The Greeks and many others would be well advised to act on this advice immediately. For many of these countries, it is already obvious that their current debts cannot be repaid in the physical universe as presently constituted. For them, default is simply an inevitable necessity, not a choice. Their only choice is now when they will default, and with what strategy. In this regard, their choices are essentially two. On the one hand, they can destroy their national economies, dilapidate their capital stock, and destroy the living standard of productive working families through criminally stupid austerity programs and budget cuts of the vandalistic type dictated by the monetarist crackpots at the International Monetary Fund, European Commission, World Bank, Bank for International Settlements, and similar institutions. At the end of all this unspeakable torture of austerity, they will find their political institutions destroyed, their internal governability and stability deeply compromise or totally wrecked, and their ability to pay lower than when they started. At the end of all this, they will default anyway, and drift like derelict wrecks on the world ocean. Many of them will fall under dictatorships, or even fascist regimes.
The alternative to this nightmare scenario is to use the time-tested weapon of the unilateral financial debt moratorium as a means of national survival and national sovereignty. (If Republican US President Herbert Hoover could successfully propose an international financial debt moratorium among Germany, France, and Great Britain, and the United States in June 1931 to fight that depression, this approach cannot be regarded as wild radicalism.) This freeze on all payments of interest and principal on international financial debt must be conducted in an orderly, legal fashion, fully explained to the population and presented as an integral part of a strategy for national economic recovery. Plans should be made in advance for suppressing financial speculation, while mobilizing domestic economic resources for the most ambitious projects of national public infrastructure as a means to radically reduce unemployment and poverty. Raw materials must be secured in advance through barter deals and other ad hoc arrangements with the relevant countries, and these transactions must necessarily occur outside of the straitjacket of IMF and World Trade Organization rules.
Countries using the weapon of debt moratorium should normally be able to reduce their foreign debt exposure by about one half. If they play their cards correctly, they can do even better for their people.
Every country needs to identify at least one area in which it can produce the most advanced high technology capital goods for export, and strive to become the world leader in that department. This production must be capital-intensive, energy intensive, and high value added, and it must target the world export market. The goal is to produce something which the world will find simply indispensable, independent of whatever protectionist measures may or may not be enacted elsewhere. This effort can be used as a science driver along with other science drivers to restart scientific discovery and technological research and development throughout the entire national economy. This is the kind of strategy which the leaders of the southern tier nations of the euro should currently be elaborating.
And they need to act fast. By September, the tide of financial panic which is now engulfing Greece and Iberia will be in the suburbs of Paris and London .
sobering analysis, geopol - thank you for it!
I believe this summer will be a game changer for many nationstates (and of course, their peoples). . . would that we could all agree on whether those that are voted for are "elected officials, leaders, or representatives" . . . if one is voting for a "leader" it seems they would like to be "led" - and if anyone feels they are being adequately "represented". . . well, it would seem to be a minority opinion, IMHO.
I don't know, maybe we will have enough of a war right here at home.
http://www.huffingtonpost.com/2010/07/02/rioters-hit-puerto-ricos_n_6343...
This is global and spreading...
And they need to act fast. By September, the tide of financial panic which is now engulfing Greece and Iberia will be in the suburbs of Paris and London,,, and the U.S .
.....no more posting...hope you all have the escape and survival plan..no shit for real..
Good luck to you all...
No more posting? You mean, "ya'll better not be posting if you need to go buy canned food"? Or you mean, "I am not posting anymore"?
Cuz I really hope you do not stop posting. With regards, I speak for everyone too....
I like to believe that a lot of us here are there. With a plan that is.
My friends think I'm nuts, and I am too. But that doesn't keep me from getting more pasta, beans, rice, canned chicken, real bacon bits, corn meal, oat meal, sugar, canned fruits and veggies, etc.
The garage is starting to look like the general store in a tiny mountain town somewhere. But it's stuff we use anyway, so we're just laying on extra for the back end of this fiasco. If things don't break down because the Tooth Fairy saves us, that's fine. We just keep using the older stuff and putting the new stuff in back.
Kerosene in the shed, kerosene heater and cook stove near the food. Propane for the cooker out back.
We all cook, and I can make anything into a meal if I've got a couple of onions.
I'm not expecting a total breakdown of law and order in our small city. If Road Warrior days arrive, I'm outta here anyway. We're ready for tough times, but not Armagheddon.
Prep includes a month's budget in cash in case the banks take a holiday with our paychecks. And our PM stash is safely away from the not-so-safe deposit box, free of PAT-RIOT act encumbrances.
We don't LOOK ready from the street. We're surely not survivalists. But we'll be okay.
I'm gonna miss those visits to the restaurants though. But we'll be eating in the kitchen while some of our more hapless neighbors try to figure out how to operate their microwave oven and wondering where the food comes from that you stick inside.
Anybody who hasn't given serious thought to what happens if the supermarket runs out of its 3 day supply of food needs to mull it over a little.
The stores, gas stations, restaurants and everybody else stay in business with credit. If credit implodes, the goods stop moving and we all have a new "dominant paradigm" to subvert. So when they turn off the Visa card system, it could get interesting.
As they say, "You can't eat plastic." (Okay, you can, but it gives you enlarged man-boobies.)
My plan was to walk out in front of a bus, but with my luck it'll be the first service they cancel.
Thanks for the crummy laugh! Reminds me of a joke told by Robin Wright (if I remember his name correctly): "I tried to commit suicide with a bungee cord.
...(long pause)...
I almost died three times."
I googled Webster Tarpley and watched a couple videos on Youtube including "The men behind Obama" which dates from March 2008. In that video, he claims that the neocons under Bush have basically been replaced by Zbignew Brzezinski and his cohort. The focus is now on containing--perhaps by destroying--Russia and China, thus giving the US and Britain 100 more years of world domination. He claims that the real interest we had in the tragedy of Darfour is that the Chinese receive a quarter of their oil from the Sudan. Likewise, we are trying to boot the Chinese out of Africa to starve them for resources. Tarpley claims that our interest in Iran is to play Iran against Russia rather than to go to war with Iran ourselves. He claims that our ultimate goal is to force the Chinese to get all their oil from the Russians, with the implication that war between those two would ultimately bring down both.
He should supply a follow-up to what he claimed in 2008 with regard to our goals in Africa. There has been no war of the US against the Sudan, for example, and I believe the Chinese still buy Sudanese oil. His claim that we will not go to war with Iran also seems to be doubtful, given the present armada in the Gulf of Persia, which would suggest that we are already close to being on a war footing against Iran. If that is the case, that would seem to argue against his proposition that we would like to have the Russians do unto Iran what they had previously done unto Afganistan, which ended up costing them their empire. He also claims that the missles we placed in Poland are there to serve as a second strike against a Russian retaliation after we launch a first strike. He sees this as a reverse Cuban missle crisis for the Russians. He warns the Europeans not to be taken in by Obama and to see how the American game plan is to use Europe as pawns in its goal to bring down Russia.
I don't know, but I watched this 2008 video thinking to myself that none of his predictions came to pass (eg, the Chinese are stronger than ever in Africa), and I got the same feeling from him that I got reading Chomsky: that his emotional bias against the US is leading his analysis and causing him to make predictions that do not hold up. He is a persuasive writer, as his posts on ZH show, but he seems to have a bee in his bonnet which makes his judgement less reliable, IMO. Obviously he is leagues ahead of me in his knowledge, but each of us has to make an individual judgement when faced with the testimony of experts.