Sunday, June 6, 2010

It's so BRAZEN

The coordinated destruction of the real economy is being planned in public.

Did G20 Economies Just Vote for Another Great Recession, Massive Unemployment?

By: Scarecrow Saturday June 5, 2010 12:10 pm 

Unless I misunderstand these stories, it appears the world’s biggest economies just decided, over US objections, to resurrect Herbert Hoover, rebury Keynes and pursue another Great Recession, tanking their economies and putting millions more out of work. And it’s all driven by a world-wide plague of deficit hysteria syndrome.
You can’t tell what the world’s largest economies just agreed on from the AP (via WashPost) article of the G-20 financial summit in South Korea. The piece has several diplomatic statements from Tim Geithner warning Europe it can’t look to a booming US economy to lift Europe, so they better have plans to grow their own economies by expanding internal demand. Stronger demand in Europe would then support US hopes to use increased exports to help drive US economic growth. That plan now looks dead.
The Financial Times coverage of the same event tells us a majority of G20 nations plus the International Monetary Fund (IMF) are planning to shrink their economies and depress demand, signaling a broad rejection of the claimed US position. more

Into the Abyss: The Coming Cycle of Debt Deflation
Ron Hera | Jun. 2, 2010, 10:03 AM 
One of the most famous quotations of Austrian economist Ludwig von Mises is that “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.” 
In fact, the US economy is in a downward spiral of debt deflation despite the bold actions of the federal government and of the US Federal Reserve taken in response to the financial crisis that began in 2008 and the associated recession. Although the vicious circle of debt deflation is not widely recognized, precisely what von Mises described is happening before our eyes. more

How Deficit Hawks Will Keep Cutting Spending Until We're All On Food Stamps
Marshall Auerback | Jun. 2, 2010, 10:41 AM
It’s a wonderful tradition to use Memorial Day to honor the memories of those soldiers who gave their lives to this great country. Unfortunately, we seem equally determined to use current economic policy to kill off what’s left of our live civilian economy via insane fiscal austerity, as this NY Times piece illustrates.
The following graph is taken (via Bill Mitchell’s blog) from the datasets available from the US Office of Management and Budget. They show the federal deficit, outlays and receipts as a percentage of GDP from 1930 to 2010. As Mitchell notes, history is not even being repeated at present. The fiscal expansion was nothing like that which occurred during the prosecution of the Second World War.

The reason the US economy grew again after the War is because the country did not go collectively mad and immediately enforce fiscal austerity to attack the financial ratios, despite the fact that the war raised the publicly held debt ratio well above the 90% threshold that Ken Rogoff and Carmen Reinhart keep warning us about. In the war years from 1941 to 1945, the GDP doubled while the national debt increased by more than 500 percent as Roosevelt financed much of the war expenditures through government borrowing. By the end of the war in 1945, the national debt had increased to $258 billion and was equal to approximately 120 percent of GDP. more

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