The globalized economy is a colossal Ponzi Scheme in which the vast majority survive on the bread crumbs falling off the table. The possibility of 7 billion people achieving a consumption-oriented lifestyle is zero, so the World Bank conveniently set the poverty line at $1.25/day to legalize global slavery. As long as someone else's children are doing the suffering, it's "all good". Post-2008, this illusion was extended merely by plundering all future generations.
Wednesday, July 11, 2012
CNBC v.s. Krugman - Dumb and Dumber
You get to pick which is which...
Let's see, on the one side Joe Kernen/Michelle Caruso Cabrera both ardent Supply Siders and die hard apologists for Wall Street - before, during and after the events of 2008.
Therefore, implicitly or explicitly they support:
- Crony capitalism - Wall Street and Washington joined at the hip
- Tax cuts for the ultra-wealthy
- Massive global military intervention
- Deficits don't matter, as long as they support multinational corporations
There is more than enough scope in this ludicrous debate for both of these sides to be wrong and both to have equally contributed to this latent debt fiasco. Moreover ideology is not going to solve the problem, ideology is contributing to the problem. Every 'camp' thinks that they have the ideal solution to the present set of economic problems, yet all of these ideologies either contributed to the problem or they have no clue how to get us out of it.
Another rising ideology is the Austrian Economic camp which believes in laissez-faire economics and return to the gold standard. This is the model that (largely) prevailed in the early part of America's history, prior to the creation of the Federal Reserve in 1913. So, no surprise, many are harking back to the 'good old days'. We never get to hear though why the U.S. seemingly abandoned economic nirvana to create the Federal Reserve system - presumably it was all a large conspiracy (I've read the book which could have been written by Stephen King, as far as plot line - straight out of the Twilight Zone). Meanwhile, Wall Street has been running rampant in past decades under the auspices of deregulation (aka. laissez-faire). FWIW, philosophically I align with the Austrian camp for the most part, but once again there is no real world strategy for getting us from point 'A' where we are now, to point 'B' where we will supposedly be in Libertarian Nirvana.
Enter Reality and Democracy v.s. Ideology
What all of these economic ideologies leave out of their perfect world economic models is reality, and in particular political reality. As it turns out, in a democracy, people expect their leaders to be able to control the economy. No, of course not when times are good, but certainly when times are really bad. Anyone can conjure up a perfect world economic model, but what model works when the nation's capital is lit up like the Fourth of July ? So, while we can continue these ideological debates and rearranging of the deck chairs all we want, the ship is still sinking, and as usual the key questions are not even part of the debate:
Q1) How do we stop a Deflationary Depression from occurring once debt has reached 300%+ of GDP, the economy is stalling, and we have Now Entered a Liquidity Trap?
A1: Supply-Siders don't have a clue. Austrians would say you can't, short of hyperinflation which creates an even bigger (if not inevitable) problem. Monetarists(e.g. Bernanke) and Neo-Keynesians (e.g. Krugman) don't know, since they (largely) created this problem i.e. by trying to avoid all recessions. Minsky says, you can't no matter how hard you try.
Q2) Once we enter the Deflationary Depression and wipe out most of this debt, how will we rebuild the economy and create jobs i.e. when financial markets have been decimated, confidence is wiped out, purchasing power is annihilated, and the entire productive economy has been largely outsourced?