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Mega

They Have Not Got A Clue!

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Crypticism, thy name is Mega.

Economists Haven't Got a Clue

Death By Globalism

Have economists made themselves irrelevant? If you have any doubts, have a look at the current issue of themagazine, International Economy, a slick publication endorsed by former Federal Reserve chairmen Paul Volcker and Alan Greenspan, by Jean-Claude Trichet, president of the European Central Bank, by former Secretary of State George Shultz, and by the New York Times and Washington Post, both of which declare the magazine to be “ahead of the curve.”

The main feature of the current issue is “The Great Stimulus Debate.” Is the Obama fiscal stimulus helping the economy or hindering it?

Princeton economics professor and New York Times columnist Paul Krugman and Moody’s Analytics chief economist Mark Zandi represent the Keynesian view that government deficit spending is needed to lift the economy out of recession. Zandi declares that thanks to the fiscal stimulus, “The economy has made enormous progress since early 2009,” an opinion shared by the President’s Council of Economic Advisors and the Congressional Budget Office.

The opposite view, associated with Harvard economics professor Robert Barro and with European economists, such as Francesco Giavazzi and Marco Pagano and the European Central Bank, is that government budget surpluses achieved by cutting government spending spur the economy by reducing the ratio of debt to Gross Domestic Product. This is the “let them eat cake school of economics.”

Barro says that fiscal stimulus has no effect, because people anticipate the future tax increases implied by government deficits and increase their personal savings to offset the added government debt. Giavazzi and Pagano reason that since fiscal stimulus does not expand the economy, fiscal austerity consisting of higher taxes and reduced government spending could be the cure for unemployment.

If one overlooks the real world and the need of life for sustenance, one can become engrossed in this debate. However, the minute one looks out the window upon the world, one realizes that cutting Social Security, Medicare, Medicaid, food stamps, and housing subsidies when 15 million Americans have lost jobs, medical coverage, and homes is a certain path to death by starvation, curable diseases, and exposure, and the loss of the productive labor inputs from 15 million people. Although some proponents of this anti-Keynesian policy deny that it results in social upheaval, Gerald Celente’s observation is closer to the mark: “When people have nothing left to lose, they lose it.”

The Krugman Keynesian school is just as deluded. Neither side in “The Great Stimulus Debate” has a clue that the problem for the U.S. is that a large chunk of U.S. GDP and the jobs, incomes, and careers associated with it, have been moved offshore and given to Chinese, Indians, and others with low wage rates. Profits have soared on Wall Street, while job prospects for the middle class have been eliminated.

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What we have in front of us is an unaware economics profession. There may be some initial period of deflation as stock and housing prices decline with the economy, which is headed down and not up. The deflation will be short lived, because as the government’s deficit rises with the declining economy, the prospect of financing a $2 trillion annual deficit evaporates once individual investors have completed their flight from the stock market into “safe” government bonds, once the hyped Greek, Spanish, and Irish crises have driven investors out of euros into dollars, and once the banks’ excess reserves created by the bailout have been used up in the purchase of Treasuries.

Then what finances the deficit? Don’t look for an answer from either side of The Great Stimulus Debate. They haven’t a clue despite the fact that the answer is obvious.

The Federal Reserve will monetize the federal government deficit. The result will be high inflation, possibly hyper-inflation and high unemployment simultaneously.

The no-think economics establishment has no policy response for economic armageddon, assuming they are even capable of recognizing it.

Economists who have spent their professional lives rationalizing “globalism” as good for America have no idea of the disaster that they have wrought.

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.

This is the most important bit and the author isn't some unknown analyst, as you can see in bold, he is someone who is most definitely qualified to talk about such matters.

The only way the US and the west can get out of this mess is through miraculous economic growth, which is what they're foolishly trying to engineer with all the QE. Not going to happen because we are maxed out at the end of a decades long credit cycle, so they are just pushing on a string. The end result will be even more catastrophic than it would have been.

As an example UK economic growth was 1.1% in the last quarter (no doubt overstated), that's 4.4% annualised, but RPI was 5% (no doubt under reported). Even if you believe the official figures our economy is shrinking at a rate of 0.6% a year. There's no way to turn this around with the record levels of personal, national and corporate debt that exists. The only way is through debt default, but that sinks the banks and would give us global financial meltdown. So it's strategic debt default money printing as the only option, thereby destroying wealth saved in paper money and making everyone poorer as the currency weakens.

All good if you've got gold though, cher-ching!!!

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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