Euro Voters Reject Austerity

Voters in Greece, France and even in local elections in Germany rejected enforced austerity in recent polls. French voters narrowly elected the Socialist Francois Hollande on a platform demanding renegotiation of austerity measures demanded by the European Union. Taxes are already high in France so he’ll have his work cut out for him raising taxes enough to make a difference. At least if he can put people to work the country won’t dive deeper into debt and deficit.

In Greece the two main pro-austerity parties, who between themselves have governed the country for the last 40 years, together received less than 32% of the vote. The anti’s however, divided between the far left and right, will probably not be able to agree amongst each other to form a government so new elections are likely soon. But that means they won’t be eligible for additional bailout money and will likely default, though since they’ve already forced creditors to take substantial haircuts, to all intents and purposes they’re already in default. It’s no more than a pretense to think otherwise.

If they knuckle under and accept IMF and ECB austerity - the leftist candidate called those international bodies loan sharks - there’ll be 5 to 10 years of economic pain. If they default, they’re basically facing the same 5 to 10 years of wrenching changes and economic dislocations, but at least their pain won’t be for the benefit of the banksters and 1%.

The one percent’s mania for austerity for everybody but themselves is diving economies ever deeper into recession. If people aren’t working they aren’t paying taxes but are requiring government help for survival. Cutting is the wrong thing to do when a country is in recession, however, if a country runs big deficits in good times there’s no leeway for additional spending during downturns. As mentioned previously, the half of Keynesianism that governments have conveniently overlooked is the need to build surpluses during boom times. It’s too easy to prop up economies and make everything look good by spending money you don’t have. It’s too easy to think you can rely on growth or inflation or something to come along in the future to make the debt easy to manage, because as we are seeing it doesn’t always work that way.

 In any case, almost everybody is missing the point. Last year greenhouse gas emissions grew faster than ever before. Just imagine what would’ve happened if many parts of the world were not in recession and there was no effort whatever to curb emissions. Those record emissions might’ve been doubled. So while my heart goes out to those developed world people in America and Europe who are jobless and suffering, I have to say to those same people, Thank you for being poor and not being able to consume.

What’s needed is a new paradigm where slackers are tolerated if not appreciated and those who live simply by choice are honored; where growth is reserved strictly for non-material plane efforts: knowledge, intellect, beauty and spirituality. The tiny Himalayan kingdom of Bhutan is promoting a Gross Happiness Index in place of Gross National Product which includes everything that is bad for us as well as good… every time an auto accident causes personal or property damage, it gets added to GNP. You want to help the economy? Get cancer.

We have to retrench. If somebody really doesn’t want to work (and so much of what’s classified as work today is so demeaning and undesirable, who can blame them) why not give them the minimum for survival and thank them for not consuming. Nixon had the right idea with his guaranteed annual income, which, if I remember correctly was pegged at $4000 per year. With a little casual work on the side, that’d be enough (in today’s dollars) to live a simple but decent life. We also need to take France’s lead and shorten the work week along with encouraging deflation to make life cheaper. It’s already happened in the housing market. It’s now much more possible for an average person with a job to afford a home.

Shortening the work week has the added great advantage of tremendously reducing rush hour traffic. Some people would work shorter hours five days a week, others would work a day less. Either way, all transportation systems would have much lighter burdens. Now most people are forced by the eight hour day to come and go at the same time. Shortening the work week would also give people the time to get involved in society and community, not to mention family, self -improvement and pleasure.

The way to deflate the economy is to tax the rich, really tax them, tax the shit out of them. Nothing good comes from the wealthy having too much money. If they have less money to throw around, prices would be forced down. This is especially true in places like New York which are magnets for vast wealth. If people can no longer afford sky high prices for purchasing or renting housing, then their prices will go down, and all real estate prices will follow, benefiting everybody (but the landed wealthy) in the long run.

The current system is top heavy. BBC interviewed a bankster asshole a while back who kept repeating how important the financial community was to the UK and predicting doom and disaster if a small stock transaction tax were imposed. He conveniently ignored the hundreds of billions of dollars the banksters cost the people in bailouts. A majority of people in a UK survey working for the banks said they were there strictly for the money and that they didn’t think they deserved to earn as much as they did. With so many people in finance earning upwards of half million a year, they’ve turned once middle class London neighborhoods into enclaves where only the upper classes can afford to live and by extension have raised the cost of housing for everybody in the city.

The other major change that needs to happen to save the world is to tax advertising, exempting only small businesses. I’m convinced that marketing is the root of all evil, not money. Money, after all, can do good things, while the sole purpose of marketing is to convince people to buy things they might not need or are possibly bad for them. Even if what they are encouraged to purchase through adverts isn’t necessarily bad, the act of consuming is going to consume our planet and people need to be encouraged to hold back, to not indulge, to buy only what they really need. The present path is not sustainable, let alone healthy.

Admittedly I’m way out of synch with prevailing philosophy (it’s not the first time). The idea of applauding slackers and promoting deflation and reduction in place of growth is about as likely in the present political climate as encouraging pedophilia and welcoming pollution-caused cancers, nonetheless that’s where the world needs to go. That it can’t possibly go that way is a sad commentary on the state of our only planet and its inevitable downward slide into catastrophe.  

Greek Drama

The Greek Drama keeps getting stranger by the day. Greece’s prime minister, George Papandreau, after acceding to the financial troika’s (IMF, European Central Bank, European Commission) demands to impose further harsh austerity measures in exchange for the latest in a long list of bailouts decided to put the measure to a referendum. Then he changed his mind; now he wants a unity government, I expect so the people’s wrath can be spread around to all the political parties. No matter what the citizenry actually wanted, all the parties were going to back the deal anyway, so why take the blame himself for his party only?

As part of the deal private Greek bond holders are going to take a 50% haircut; that is, lose half of their investment. The part owned by the big banks will then be covered by bailing them out. That is why there is such heavy pressure and urgency in getting Greece to take on the new debt; better the Greek people pay than France, Germany, etc., having to ‘recapitalize’ their banks with their own money.

In the end result, if everything works according to the troika’s optimistic projections, Greece’s debt to GDP ratio will fall to 120% in 2020. In other words, after eight years of wrenching and painful sacrifice, they will still be hopelessly mired in debt. Part of the problem, it seems to me, is that the leadership is conflating default with leaving the Euro. The two are not necessarily mutually exclusive, because even if Greece formally, technically ‘leaves’ the Eurozone and prints its own money, most transactions there will still be in Euros unless the government specifically prohibits their use, which would be absurd. Go to any European country outside the Eurozone and you can spend Euros as easily as the local currency, at least in the touristy or big city areas.

All the money now in circulation in Greece is Euros; tourism, the country’s number one industry will continue to bring in Euros and all contracts signed since Greece joined the Euro in 2001 are in Euros. The beneficiaries of those contracts will demand payment in Euros.
What’s to stop Greece from continuing to use the Euro after they’ve ‘left’ the Eurozone? For instance, I live in Cambodia in which the US Dollar makes up 80 to 90% of all transactions even though the country also has its own currency. There are no US coins here so everything priced less than a dollar is in riel, the local currency. Also all transactions with the government are made in riels. Cambodia, as well as the several other countries who use the dollar as their own never asked America for its permission to use the dollar.

As long as the Greek people are going to deal with hardship anyway they’re better off defaulting. That way it can be cathartic and the citizenry can come together in a national forum and decide where they want their country to go rather than be forced to accept the nasty, punitive, neo-con economic prescriptions/ultimatums of the elite whose primary goal is to protect their banks and by way of inference, their investments. As I’ve stated repeatedly, there’s too much money at the top. If the 1% aren’t willing to give some of it up in increased taxes they should at minimum lose out for their poor investment choices. If the top are cut down to size, everyone else will benefit.

While Greece, the small potatoes, is in turmoil, Italy, the big cahuna, is teetering on the brink. It’s that old contagion thing: If Greece is having problems, then maybe Italy will be next, so let’s jack up the interest Italy has to pay now. The bywords of the recent international summits is: Calm the Markets; that’s the primary goal of the bailouts and rescue funds. If the financial community, which brought down the world economy with its shenanigans, is the least bit ‘jittery’ then they’ll force up interest rates to the point where countries can no longer sustain them, so that Italy last paid 6.6% on its bonds. It cannot go on very long at that rate before it can no longer meet its obligations.

Italy’s debt is very large, 120% of GDP, but its annual deficit actually isn’t, so it’s not really in the same predicament as Greece which is running very large deficits on top of its extremely high national debt ratio. Nonetheless, because the Markets rule, they decide whether a country passes or fails. Without the ‘Greek effect’ few people would be noticing Italy’s problems, or at least not think they were all that important or imperative. High debt doesn’t matter as long as the lender thinks the loan will be repaid. Witness the US which is currently paying very low interest in spite of its massive debt.

To bail out Greece to the tune of a couple of hundred billion is one thing, but to come up with the trillion or so Italy would need… well, that would be a might more of a challenge, possibly even insurmountable.

Meanwhile in make-believe-land, aka, America, there is great wrangling and hand wringing over cutting the deficit by $400 billion a year - from $1.5 trillion to $1.1 trillion. Even after shafting people who depend on benefit programs - SS, Medicare, Medicaid, as Dumbocrats have proposed - there’s still a $1 trillion plus deficit. A healthy economy would reduce the deficit by $400 billion, but that’s nowhere on the horizon, especially since both parties are intent on taking money from commoners, who spend their money in the economy, rather than taxing the wealthy who hoard it or speculate, either way with no benefit to the society as a whole.

I know Obama has taken out his populist, election-is-approaching, talking points about taxing the wealthy, but it’s nearly all lip service since he’s proposing minute amounts from the very wealthiest; nothing that would remotely get the country’s books in order. Further, Congress’ most liberal members, cowed by the neo-con paradigm, are proposing a .25% financial transaction tax to yield $100 million per year when they should be demanding at least 1%. There’s no legitimate long-term investor who’d be put off by paying 1%.

When Greece’s debt to GDP ratio (under the present optimistic scenario) is down to 120% in 2020, the US’s ratio, without drastic attitude adjustments, will be up around 160%; where Greece stands today. Some argue the deficit is not a great problem, better to borrow to create jobs than be stuck with a faltering economy. I might agree if there weren’t such massive wealth reposited in the elite. If a single one time 8% wealth tax on those with more than a million dollars can cover an entire year’s deficit there’s no reason whatever for any cuts in benefit programs, and lots of economic, as well as moral, reasons to tap into those deep pockets.

The US is experiencing a deer-in-the-headlights moment. Crash and burn is coming but Congress is incapable of responding - except by digging in its heels, and challenging the gods of reality, as it were.

It’s the Bank’s Problem

There’s a saying about banks and borrowing: If I borrow $10,000 from the bank and subsequently default, it’s my problem. If I borrow $10 billion from the ban, and default, it’s the bank’s problem.


Greece is on the edge of default. All the money thrown at the country in recent times has been expended in the fervent hope that some miracle will happen to make the country’s debt sustainable. European and international financial institutions are in denial of the inevitable default so are merely delaying the day of reckoning.


They are deathly afraid that Greece’s default will drag several large European banks down with them, because that’ll mean ‘recapitalization’, in other words, another bailout. If they can stave off default by loaning the country lots of money (which it’s very unlikely to ever be able to pay back under any circumstances) then they won’t have to give away lots of money to their too-big-to-fail banks. Either way a lot of good money will be thrown after bad and the citizens of the more frugal northern countries called upon to bail Greece out will be just as irate as the Greeks who are being called on to make sacrifices.


There are three basic reasons why default is inevitable. First is that the country’s debt level is just too high. All of the austerity measures taken and demanded so far by the international financial institutions and Eurozone countries who are loaning the money are only reducing the annual deficit, not balancing the budget, so under the most optimistic scenario, Greece’s debt will continue to rise to even more stratospheric and unsustainable levels. Secondly, many, if not most of the measures undertaken to reduce the deficit are slowing the economy, thus raising unemployment, which then increases social costs and reduces revenue and so turns out to be counterproductive; the more austerity that’s enforced or attempted, the closer the country comes to default.


Finally, the people won’t stand for additional austerity regardless of any consequences that might befall the country. Maybe they truly do not understand the seriousness of the situation or maybe they do, but either way they are fighting back to the point where the government will be powerless to act. Maybe the Greek people think default will be better than trying to meet the country’s crushing debt obligations or maybe not, but either way it won’t be pretty. At least under default the slate will be wiped clean, or at least reduced to a manageable level.


Greece’s economic problems, along with those of Ireland, Portugal, Spain, Italy, UK, US and many more countries, goes back to the fundamental ethos of neo-liberal economics that’s held sway in the financial world since Reagan and Thatcher.


Neo-liberalism has three basic tenets. First is the obsession with growth in all situations regardless of the existential circumstances of each country. Second is the insistence on low taxes on corporations and the wealthy. Third is the demand that the actions of the economic establishment be unregulated.


Japan provides the best example of the absurdity and idiocy of the all-growth-all-the-time paradigm. Economists the world over have lamented Japan’s ‘lost decades’ of stagnant economic growth. But Japan is already a wealthy country and it not only has a declining population but also an aging one. If population as a whole is declining and the proportion of the elderly, who typically have less need or desire to consume, is growing then the economy should be declining, not growing. Moreover, if the economy is ‘stagnant’(I prefer the word, stable) in a declining population then its per capita income is actually growing: shouldn’t that be enough? And yet, in a frantic and ultimately futile attempt to adhere to neo-liberal economics the country has amassed the world’s highest debt to GDP ratio - 220% - building lots of bridges to nowhere. If they hadn’t accepted the obsessive growth paradigm they could’ve shared the available work and taken lots of vacations instead of continuing to work the longest hours of any industrial society. They could’ve rested on their laurels, been content with their already wealthy status and started to enjoy life.


The insistence on low taxes for corporations and the wealthy has two major impacts. One is the excessive and destructive speculation that arises from the wealthy having too much money on their hands. The other is the debt that governments accumulate because tax receipts are insufficient when the fat cats are lightly taxed.


Finally, the demand that the activities of society’s economic controllers be unregulated combined with them having more money than they know what to do with brings wild economic swings with inevitable and debilitating busts coming after giddy and unsustainable booms. It doesn’t have to be that disastrous for an economy or a people. Germany experienced a downturn equal to America’s but its unemployment rate grew only minimally. They accomplished that by setting up a program that encouraged companies to put people on short hours with the government making up the difference.


If we were going for sustainability, the good life, spiritual growth instead of blind, mindless consumerism, there’d be neither booms, nor busts. There’d be neither high unemployment, nor widespread poverty. It wouldn’t take much in the way of income redistribution to insure that no American needed to be hungry or homeless. Meanwhile, the poor and middle classes are called upon to sacrifice so that the wealthy can have more tax breaks. And the Repuglicans call it class warfare when the masses object.


Every tax law is a political statement; one way or another somebody is going to have to pay. Since nobody likes taxes and governments are therefore reluctant to levy them, they’ve relied on huge levels of borrowing to make up the difference in the fervent hope that economies will grow enough to make the additional debt payments tolerable. That works until the burdens get too large for governments to sustain and/or inevitable downturns happen because of deregulation and speculation. Either way you’re in a pickle.


Now Obama, our very own Manchurian candidate, is starting to talk tough about raising taxes on the wealthy. Ah, yes, the campaign is beginning and since raising taxes on the wealthy is supported by more than 70% of the American people, it sure won’t hurt his chances for reelection to throw a little red meat to the angry electorate. However, he also made sure to keep his overseers happy by agreeing to cuts in Medicare and Medicaid, saying he wouldn’t accept cuts in those programs without (minimal) tax rises for the wealthy. In other words, slash away wingnut congress, your dream of starting the evisceration hated social programs has been answered.


The world is slouching towards economic disaster because nothing has changed since the 2008 blowout to rein in out-of-control banksters. Witness a ‘rogue’ trader at Swiss bank UBS losing the bank more than $2 billion. You’d think they’d be watching a little more closely or investing a little more conservatively. The certainty of another crash is also indicated by a recent news announcement from the UK that retail banks, where people have their checking accounts, etc., were going to be separated from investment banking, which is no more or less than speculation, a.k.a., gambling. Separation is an absolutely essential change if future bailouts are to be avoided. The problem is that the UK’s new rule is not programmed to take effect until 2019, giving the banksters all the time they need to create another, even multiple, banking meltdowns. Why 2019? Why not 2050? Sure wouldn’t want to unnecessarily rush the banks, would we?


Anyway, there’s always more money in the coffers for bankster welfare… until there isn’t. There will be until the people rise up and say, No more!, regardless of the consequences.

Default

Default

The third topic of thunderous geopolitical import I’ve needed lately to write about after Fukushima, which keeps getting worse, and the regression of American politics, which probably can’t get any worse, is the Eurozone debt crisis which will later, if not sooner, see Greece, as the first of several countries, default on its debts or at minimum force a restructuring of its debt.

The IMF and European Central Bank think they are bending over backwards to help Greece avoid default. In the event, their prescriptions for recovery and the onerous conditions placed on their ‘generosity’, only delay the inevitable. By the time the latest bailout is added to their debt, it’ll equal more than 160% of GDP and debt service an unsustainable 6% plus of GDP. In contrast, US debt is about 100% of GDP and debt service about 1.2%. If the US were paying debt service equivalent to Greece’s that would come to about $1 trillion a year. The total US budget is now about $3.4 trillion.

Part of the problem is the high interest rates – 5.5% - the monetary agencies are charging Greece. The money made available to the ECB and IMF to help countries in distress should be doled out at low interest rates, they are, after all, not commercial banks looking for profits, but public entities financed with public money established for the public good. Why then would the IMF want to make money from a country that is dealing with social unrest, political upheaval and imminent default? Their mindset is so far from humanitarian they don’t even know they’re being assholes and helping to bring the country down instead of saving it.

That is combined with required austerity measures which, ostensibly, are to rein in excess government, but in reality add greatly to unemployment, and thus reduce tax revenue. Since affluent Greeks are adept at avoiding taxes it’s only the commoners that pay and only when they are working. Moreover, with the economy going downhill those who do have jobs aren’t spending in fear they might join the ranks of the unemployed. The finance community is participating in bringing the country down and making it impossible for Greece to ever pay its debt.

When an individual reaches an equivalent level of debt and it’s clear that they’ll never have the ability to pay, they declare bankruptcy. Their remaining assets are divvied up amongst creditors and they start over. Once you’ve gone that route, you’re on your own, you’ve no choice but to live within your means since borrowing is no longer an option.

The head of the ECB said Greek default is unthinkable because that would mean recapitalizing the big banks that have invested in Greek bonds. When the masses face unemployment and poverty, they’re told to buck up and tough it out. When banks and investors stand to lose out because they gambled (that’s what investing is) on the wrong investments, they get money thrown at them. Germans are widely opposed to bailing out Greece, but if they don’t, they’ll be bailing out their banks.

Greek prime minister Georges Papandreou has warned default will be catastrophic. Very true, but sometimes that’s exactly what’s needed to right the ship of state. For the Greek people who’ve been let down by their government and in some ways their culture, whether they go down by way of default or unsustainable debt, it’ll be catastrophe either way. They were let down by their government (the previous conservative administration) because it used Goldman Sachs’ expertise in deceit and underhandedness to hide the amount of debt they were accumulating. Let down by their culture because of a bloated civil service and widespread tax avoidance where doctors are able to claim annual incomes of $25,000 because they’ve bribed the tax authorities to look the other way.

It’s important to note that the Greek government could’ve continued on its merry profligate debtor’s way if the financial crisis of 2008 hadn’t intervened to throw a lightening bolt into the endless growth bubble. That’s why you’re supposed to save for a rainy day, make hay while the sun shines, bury your acorns in fall to get through the tough times of winter. Most people are aware of the half of Keynesian economics which says countries should deficit spend in times of recession to keep their economies going, but few remember the other half where he said they should put money aside during good times to have available during hard times.

The problem of excessive sovereign debt has arisen because dominant bankster economic philosophy over the past few decades requires that taxes on the wealthy and corporations be low which serves to starve government of revenues and simultaneously make it easy for governments to borrow because those with money have a lot of it laying around needing to do something with it. As mentioned previously, it’s a lot easier to use borrowing to make an economy look good than actually raise the necessary money through taxation. The borrowing is justified by assuming that a growing economy will make it easy to service the debt, and to a certain point, it will… until it stops growing, which inevitably must happen since nothing can grow indefinitely.

If world financial institutions actually wanted to help the people of Greece, they’d provide low or no interest loans to consolidate debt and an equivalent amount to finance infrastructure improvements and sustainable energy production to put people to work. They’d also force creditors to restructure their loans by extending their payback dates and lowering interest rates. Instead they are punishing the people with pay cuts, worsening working conditions, very high unemployment and increased taxes, all while the country’s elite continue to shirk their responsibility to help fund government. They are forcing a debt death spiral.

Ironically, default will change Greece in just the manner prescribed by the bankster community. The difference is that a lot of rich people will also share the pain and get hits in their deep pockets. Wouldn’t that be nice. And isn’t it about time. The banking system will be in crisis and lots of investors will get haircuts… well great, there’s too much money at the top, time to cut the elite down to a fairer, more equitable size.

The workers and salarymen and women will get hit hard, but they’ll also be able to start fresh and create a new society. Think about it: If a country is getting 40% of its budget from borrowing and suddenly that money is no longer available (that’s the percentage for America, I don’t know the exact figure for Greece) it will be a formidable challenge to keep the country afloat. The outsized civil service will be pared drastically. All government functions will be sliced to the bare bones. With the public sector starved for cash, the tax collectors will be, or should be, out doing their jobs with a vengeance. At least they won’t be spending a huge portion of their income on debt service.

It’ll be chaos and turmoil in the beginning with mass unemployment and poverty. In two or three years they’ll be back to some semblance of normality. In seven to ten years they’ll be going strong, starting from a much stronger, more equitable base. And it’ll be a warning to other countries to keep their books in order – including the US. And a warning to banksters and investors that they won’t always get bailed out.

Bubblemania

When the Greek debt/deficit crisis first bubbled up at the beginning of the year it was said to be a problem for that country but wouldn’t extend to others of the Euro zone. Greece after all only makes up about 2% of the Euro zone economy and the mainstays of that area, Germany, France, in particular, were not in bad shape.

Just a few months later there’s talk of doom for the Euro and it’s lost about 20% of its value against the dollar… as if the US didn’t have its own serious fiscal problems with debt and deficit of huge proportions. Fear, however, is contagious and investors - banks, fat cats and institutions - are getting spooked and that is leading to demands for high interest to compensate for the very real possibility of default.

Greece is being forced to tighten its belt, but while that’s inevitable, frugality may also exacerbate its fiscal problem by slowing the economy and consequently reducing tax receipts. But the country was living beyond its means before the recent sharp downturn. Borrowing is just too easy as a means of paying bills and stimulating the economy. It’s a nearly painless way to make everyone happy; that is, until the payments come due.

Sovereign debt is addictive. It’s fed by the neighborhood pushers - the banks, etc. - who generally aren’t worried about your ability to pay it back because they expect you to get bailed out if you run into trouble. That, however, adds to the total debt, only stretching out the payment schedule. In the case of Greece, accepting the bailout will bring its national debt to 150% of GDP from the current 115% and still leave it in precarious financial straits. Ultimately, the choices are narrow and stark: pay it back with great difficulty or default with the resulting chaos.

Borrowing has also of late been made easier by the existence the vast amount of wealth held by the filthy rich who need to have something do with their oodles of cash. The politics of the past 30 years has had governments throwing money at the wealthy in the (absurd) belief that their having it will accrue to the benefit of all. As a result they have far more than they know what to do with.

The result is a situation where the top dogs are flush while governments are put through the ringer. Everything governments do for ordinary people gets squeezed so the wealthy can have more money to play with. But they can’t spend very much of it since they already have everything. According to the theory, they will use their money to start new businesses, but they hardly ever do that. In the event, they buy securities or real estate but that does nothing to put people to work unless it’s part of creating a bubble and that obviously is only temporary.

Today, it’s clear that America’s run up in real estate values was in large part the result of sub-prime lending. Without all that extra cash floating around looking for something to do, there would’ve been no bubble. Real estate values tend to go up in the long run but do not necessarily create bubbles.

Many commentators on the left have been and still are pushing for additional stimulus spending. This is fine. Maintenance and construction of infrastructure is needed and important, especially if it involves electric rail transportation or conversion to alternate energy. Supplementing state budgets so they don’t have to lay off so many teachers, et.al., also is important. This however, does not require deficit spending. No borrowing is necessary to stimulate the economy, it can easily be done by taxing corporations and the wealthy. Furthermore, in contrast to taxing the lower classes which reduces disposable income and can bring the economy down, taxing the upper classes is a win-win situation, except for the wealthy, of course.

In addition to the needed revenue, curbing the wealthy also curbs speculation. If they have less money, they’ll have less ability to jack up prices of real estate and less of an impact on commodity prices. Until the recent real estate market crash, ordinary people were being priced out of the market by skyrocketing prices… tax the wealthy and prices will tend to stay more reasonable. In 2008 when oil prices hit $148 per barrel, 30% of that number was said to be attributed to speculation. Take away the fat cats’ money and you get a lot less speculation.

And I haven’t even touched on the moral imperative of correcting the great income disparity in America which is wider than at any time since 1929. It’s morally wrong, it’s economically wrong and yet Obama came into office promising tax breaks for everyone earning up to $250,000 per year. That may be politically astute, but it’s part of a blindness which will eventually have disastrous economic consequences. Those upper middle class people would be far better off in the long run paying extra taxes so that the US could balance its books rather than having the extra few thousand bucks to blow on totally unnecessary luxuries – they already have everything they truly need – or use the money to put in the bank or buy stocks.

Besides, considering the world is already using up its resources with abandon, it’s wacky and counterproductive to give people who are already comfortable more money to indulge in the superfluous.

People like to bring up the economic philosophy of John Maynard Keynes to justify deficit spending. He famously suggested back in the early 30’s that it was ok for countries to go into debt during hard times to keep the economy afloat. He was responding to President Hoover cutting the federal budget in response to declining revenues which only served to plunge the American economy further into depression. Those proponents of deficit spending conveniently forget, as noted in a previous post, that Keynes also said governments should put money away during good times to be prepared for bad times. Today it’s either high deficits during relatively good times or very high deficits during bad and not even a suggestion of getting the deficit down to a reasonable level, let alone balancing the budget for many years in the future.

However, the world is still owned by the banksters, thanks to generous government subsidies, and they will start to get freaked about huge deficits and begin to withhold their money or demand much higher interest rates… and that day is not far off, and the consequences will not be pretty.