Sunday, May 06, 2012
We Really Are Doomed
To get the title, you have to read Krugman's blog entry. But that is the thought that occurred to me today as I was watching Global Public Square with Fareed Zakaria. He had Martin Wolf -- the chief economics commentator with the Financial Times on as a guest. (Rana Foroohar with Time was also in on the discussion.) (You'll have to find the video on your own. I don't believe it's up on the site yet.)
"GPS" TRANSCRIPT HERE
"WOLF: So Germany has now insisted, extraordinarily foolishly, that everybody else in Europe -- and remember the rest of Europe is still far and away its biggest market, it's well over half its trade. So, of course, German which is hugely export dependent then immediately slows down itself. It's completely self-defeating. It makes impossible adjustment in the rest of Europe and it actually slows down growth dramatically in Germany. I think it's an extraordinarily short-sighted and foolish policy and it's having exactly the consequences you would expect. And the U.S. will, I think, without doubt, unless they go crazy in the end of this year on this ludicrous fiscal cliff the U.S. has planned for itself -- unless something crazy happens, I expect the U.S. to be the strongest large developed country over the next several years."
It's best if you read (or hear) all that in context but here's my take on it. Germany is the economic strongman in Europe. Germany is paranoid about inflation. So the countries in Europe that have run into economic troubles have been bailed out with cheap loans from Germany. But the price Germany has extracted for those loans is austerity. Germany insisted that those governments cut their budgets and balance their books. In other words, stop spending. And that is what Mr. Wolf is calling "extraordinarily foolish". Germany has told its best customers to stop spending money. And, of course, that means Germany is making less money on exports -- the chief source of its economic health.
The point is -- sane, rational, well-run governments are capable of making "extraordinarily foolish" policies. Jump to the next part of his comment.
"And the U.S. will, I think, without doubt, unless they go crazy in the end of this year on this ludicrous fiscal cliff the U.S. has planned for itself..."
That "cliff" is the automatic budget cuts and taxes everyone agreed to to get the wholly-manufactured debt ceiling crisis resolved. ( See the New York Times if you need a refresher or summation.)
"Then at the end of the year comes the prospect of what some are calling “Taxmaggedon,’' or what Ben S. Bernanke, the Federal Reserve chairman, has referred to as “a massive fiscal cliff.” "
So, we have set ourselves another time bomb to go off after the elections and we can only defuse it if we don't "go crazy". Where will we need rational, careful analysis the most? In the public sphere. We will need to educate the Public on the choices facing us. Massive budget cuts and the raising of taxes will put us in the same situation as the United Kingdom -- assuring a "double-dip" recession . And who will provide much of the public with the information they need to make these clear, rational choices? Why, the man that owns Fox News and the Wall Street Journal of course. This man. Rupert Murdoch.
May 6, 2012