I saw this off of Google news and was blown away. Here's a political leader that is advocating for everything that Jeff believes governments should be doing during this crisis, is rubbing it in Obama's face, and somehow is a Europhile.
Unfortunately this is going to be brief since I have to undergo a badgering by a bunch of Car salesmen (but I'm being a smart shopper and already got them to start throwning incentives before I've even made it to the test drive!). But I think this simple article lays out several basic economic arguments, 1) Obama argues, and is correct, that domestic consumption is the largest factor in a robust economy (why the Chinese will ultimately fall, but that's for another post). His method of achieving that, however, is to utilize Gov't spending financed by higher debt. Ultimately, this method as all of us amateurs at RTP know, is unsustainable (if we haven't already reached that point). Germany's plan, which has been tried and true since she resumed being the economic engine of Europe, maybe more prone to fluctuations in the market (when demand is low), but doesn't leave the Gov't staggering over a large debt service.
The only nasty bit is the Eurocentrists push for a financial transactions tax, I want to say this is preferable than the regulations that Obama is pushing for on Wall Street. Maybe someone should research Obama's plan and I'll try to write more about the European one?
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I think Germany could be getting sick of carrying Europe's weight.
ReplyDeleteIs it not obvious that massive government spending does not have the impact? Seems like more countries should get the message. Amazing that Germany's leader is being more conservative then ours.
It is interesting that socialist nations are making wiser economic decisions than Obama. This just shows where Obama is on the political line.
ReplyDeleteThe IMF says that government spending does not stimulate the economy. "The paper is quite technical, but the bottom line summary is that a one percent increase in government purchases (as a share of GDP) increases GDP by a maximum of 0.7 percent and then fades out rapidly. This means that government spending crowds out other components of GDP (investment, consumption, net exports) immediately and by a large amount." Anybody that has taken a basic macro economics class should know this already.
http://wallstreetpit.com/29004-the-administration-and-the-imf-on-the-multiplier
http://money.cnn.com/2010/06/23/news/economy/g20.agenda.fortune/
The UK is making some big cuts in government: it will "slash real spending in many government departments by 25% over four years". And from the same article, it appears that Obama is the only one in the G-20 that wants to continue to spend.
From this article, the on in the post, and other news I have heard, it seems like a new attitude is sweeping across Europe. But I have also heard that these cuts would send the UK into a recession and that these cuts do not address the very significant fundamental problems, large public unions and pensions and welfare programs, that led to the economic situation they are in.
I read this article that states Soros' position on the EU that it will face a recession next year. He seems to take the same position as Obama above. http://www.cnbc.com/id/37723118
Overall I have read that these cuts are not enough and don't address the fundamental structural problems and that the necessary policies would lead to an economic downturn. I don't know if people would accept, they did in Ireland so it depends on the people involved. So I don't know if these new cutbacks will make a huge difference in the long run; it seems like short of very dramatic changes the structural problems won't be solved; but these developments are a good thing and a sign that attitudes are changing.
Also on Bud-D's belief in the invisible hand: read this about North Korea where it seems to be taking effect. http://hotair.com/archives/2010/06/18/good-news-north-korea-finally-gives-up-on-communism/
Maybe they have learned from China, "Irony of ironies, the dreaded free market might now actually be the only way to preserve authoritarian rule in Pyongyang, a lesson learned long ago by Kim’s friends in Beijing."
I would have to do a lot of homework to cover the financial reform here in America. I only know the very basics of it.
Good to see Europeans (well, the Germans anyway) facing reality somewhat. We'll see if they can pull the rest of Europe away from the brink. I like Merkel, though I think she is still part of the Euro-elite and Germany can do better. Anyone named Adolph available? (I make joke!)
ReplyDeleteNote that we're not hearing the "let's be more like the Europeans" anymore like we did during Bush's tenure.
I think I agree with Melkor that this economic crisis is really forcing everyone to see what a failure Socialism is (forcing them for the thousandth time I suppose). So, probably when you guys are my age, you'll have to go through all this again.
However, even Germany has yet to come to real terms with the real problem. The fundemental problem is the collapse of the ponzi scheme of social welfare, caused by the collapse of birthrates. This painful downsizing and lowering of expectations will be continual, regardless of the government, until people in developed countries can figure out how to make babies again. When Europe is 70% Muslim, they won't be worrying too much about the health of the EU.
It is good to see some European leaders facing reality but I wouldnt just blame the ponzi scheme of social welfare I would also blame the ponzi schemes of Fiat Money, fractal reserve banking, the concept of elastic currency, and a credit system thats outa control.
ReplyDeleteThe way I see it we have the worst of both capitalist and socialist economic policies at work for us. The Dollar is not backed by anything, We dont have a true free market society and the government controls (trys to anyways) what the dollar is worth to the world market.
Money is a simple concept. Its a simple exchange of paper/metals for goods and services, nothing less and nothing more. But due to a bunch of economic theory on both the right and left we now have a bastardized system that doesnt work for anybody.
I agree that the whole economic system that is based off of Keynesian economics is broke and is to blame for the economic situation the world is in. This is a big reason why the current measures that only deal with the symptoms and do not address the real fundamental structural problems will not change the long term direction that the world's economy is headed towards. Central banking that allows governments to arbitrarily print money without any corresponding value is what allows the government to fund all of these social welfare programs with deficit spending in the first place. Central banking and Keynesian economics is what made large governments possible. It is far too easy for politicians to deficit spend on popular social projects that get him reelected. Does that mean that the world should get rid of central banking? Not necessarily, to do so would cause a lot of economic upheaveal in the short term. And the world won't stop following Keynesian economics. This is the main reason that the world's economy is headed towards a major downturn in the future. Recessions are becoming more frequent and are lasting longer. The booms are occurring at a higher maximum and the busts are occurring at at lower bottom. Eventually the system will crash.
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