I love ya Tomorrow!
A day away!
The Toronto G-20 summit was a colossal flop. The statement issued on their brand-new G-20 website includes ridiculous pablum like this:
…advanced economies have committed to fiscal plans that will at least halve deficits by 2013…
Hey, look! We’re gonna return to lower deficits right after the next presidential election! I haven’t heard that one since….the last presidential election!
Our efforts to date have borne good results. Unprecedented and globally coordinated fiscal and monetary stimulus is playing a major role in helping to restore private demand and lending.
I just love statements like that one: “…fiscal and monetary stimulus is playing a major role in helping to restore private demand…” In other words, a government spending spree funded by record deficits AND by printing money is putting some money in private hands. And these are “good results”! I’d hate to see bad results. Their lies are in plain sight.
But the measures discussed and supposedly agreed to at G-20 are not enough for Paul Krugman, Nobel prize-winning economist and leading advocate of deficit spending. Paul knows that the street cred of Keynes is on the line, that Keynesianism is about to be revealed as junk science foisted on the world by economists and embraced by central banksters and corrupt elected officials worldwide. Embraced why? Because it told them exactly what they wanted to hear: governments have a right and an obligation to manage economies, and should spend spend spend their way out of any and all recessions. Have you ever met a statist politician who didn’t want power and taxpayer money to spend? Me neither. Keynes legitimized central financial authority by giving it the mantle of science: economics. He was a fraud, his theories are complete nonsense, yet they harken back to the heady days of the 1930s when central planning and government power-worship were all the rage, both here (FDR) and in Europe (Hitler, Mussolini, Franco). Yes, I am comparing them.
Krugman, post G-20, is apoplectic. He was apparently hoping for an announcement that G-20 had decided to Spend! Spend! Spend!, but he didn’t get it (that doesn’t mean it isn’t going to happen). In an Op-Ed written Sunday night for the NYTimes he complains bitterly:
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
No, Paul, the real problem is that we’ve reached our debt limit. We were constantly encouraged to take on more debt by the Fed’s post-1980 policy of constantly lowering interest rates. Remember, Paul, lower rates make monthly payments lower, so we think we can borrow more.
But as you can see from the chart, the regime of constantly falling interest rates is at an end. We are all levered up, loaded with debt, all of our disposable income is spoken for. There is no more room to lower monthly payments by lowering rates. Joe and Jane six pack have stopped borrowing and spending. Krugman’s solution is for the government to borrow in our names and against our will, spend the money on what the government wants, and then send our children the payment book.
See that chart, Paul? Sit on it.