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Posts Tagged ‘economic crisis’

Global Economy Increasingly Vulnerable To Another Financial Shock

October 4th, 2015 Comments off

Seven years after the outbreak of the global economic and financial crisis, there are growing indications that the temporary solutions that were largely imposed through monetary policy by central banks are becoming increasingly ineffective. In all likelihood, a new global downturn in economic growth is in the cards.

The weakening economic data from China, slowdown in the U.S. economy’s job growth, worsening data in emerging economies and the Eurozone, not to mention Russia, collapse of commodity prices and volatility in the equity markets are all indicators of distress. Furthermore, the continuation of near-zero interest rates by major central banks many years after the “Great Recession” supposedly ended means that there are no more arrows in their quiver when the next major global recession strikes.

One other factor to be assessed are the fantasy employment numbers in the United States. While the official unemployment rate has supposedly been cut in half since the darkest days in 2009, in reality labor force participation is at historic lows (http://www.ibtimes.com/us-labor-force-participation-drops-absence-paid-parental-leave-keeps-women-out-jobs-2124175), revealing that the American economy is functioning well below its potential. In addition wage stagnation, and the latest revelation from the Bureau of Labor Statistics that earlier job creation figures were highly exaggerated (http://www.npr.org/sections/thetwo-way/2015/10/02/445244030/economy-adds-142-000-jobs-unemployment-steady-at-5-1-percent), demonstrates that even the U.S. economy, supposedly the healthiest on the planet, is manifesting growing signs of structural weakness.

In the wake of the global economic and financial crisis of 2008, policymakers in major economies made a bet on the same financial sector that unleashed the worldwide systemic disaster. Their decision was to engage in massive, unprecedented fiscal indebtedness and monetary loosening to prop up the investment and commercial banks, in the hope that this would stimulate reinvestment in the general economy (“main street”) and revive sustainable economic growth. There is growing evidence that this gamble made by decision makers in the world’s major economies is faltering. With staggering levels of sovereign debt, and central banks across the developed world having expanded their balance sheets almost to the point of infinity, the policymakers are left only with hopes and prayers that another massive crisis does not strike on their watch.

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Global Economy Shows Increasing Signs of Fragility: From Wall Street to Berlin, the Warning Lights are Flashing

October 10th, 2014 Comments off

In the past few days the equity markets, in particular the Dow Jones index, have displayed wild gyrations. One day stocks fall sharply, followed by a near equal climb the following day, only to shortly afterwards swing down sharply again. The sentiment-driven swings on the world’s bourses display extreme nervousness  by investors. Increasingly, they are beginning to catch on that the “recovery” was no secular recovery following the  global economic and financial crisis of 2008, but a short-lived stabilization. Now, reality is catching up fast.

For the past few months, there have been indications of stagnation in the world’s fourth largest economy, Germany, which has been the sole force holding together the debt-ridden Eurozone. Now comes the August figures on German exports: a decline of 5.8 percent (http://www.dw.de/german-exports-take-a-deep-dive-in-august/a-17983575), the worst contraction in Germany’s critical export sector since January of 2009, at the worst point of the global economic crisis.

The German export contraction is merely a hint of what is happening globally. Trade growth is slowing, inhibiting the ability of sovereigns to finance their massive structural deficits and cope with record high levels of unemployment. The geopolitical situation is very bad and getting worse, pointing to further erosion in economic confidence. It may be that the global economy is only one major crisis away from another catastrophe, as in 2008. And the sources of that next crisis are everywhere around us: the Islamic State war in the heart of the Middle East; looming tension with Iran over the nuclear issue; border tensions between India and Pakistan;  a territorial dispute in the Far East that pits China against Japan and Vietnam. Then there is the Ukraine crisis, pitting Russia against most of Europe and the United States. On top of the geopolitical flashpoints, there is now the emerging global health crisis involving the Ebola virus. Any one of these flash points can trigger a “Black Swan” event that could plunge all major economies into a severe recession.

While all those negative indicators envelope our world, central banks across the globe are giving increasing signs that sooner rather than later the policy of essentially zero-interest rates will have to be reversed, as the distorting effects  of artificially low rates cannot be maintained in perpetuity. Yet, it has been largely those low rates, in combination with the unleashing of a flood of liquidity, that are largely responsible for the limited economic growth that has occurred since 2008, along with the recovery of the world’s stock markets from their worst losses  incurred during the onset of the crisis.

The mood swings on Wall Street and elsewhere appear to be the tracing of a fiscal and economic electrocardiograph, delineating that not all is well with the global economy, and the warning signals are flashing red. Underlying and reinforcing those fears is the knowledge within the financial community that sovereigns expended so much of their capital in coping with the last worldwide economic crisis, there is little left for policymakers to react with when the next big financial and economic tsunami  strikes the global economy.

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

CLICK ON IMAGE TO VIEW VIDEO

Hillary Clinton Nude

Hillary Clinton Nude

 

 

 

Have Central Banks Gone Too Far? A Warning From The Bank for International Settlements

June 24th, 2013 Comments off

A characteristic of the global financial and economic crisis that erupted in 2008 is that central banks have usurped the role of policy maker in sovereign states from the politicians. In the absence of coherent economic and fiscal policies in the United States, Japan, the Eurozone and United Kingdom, central bankers have employed their power over the printing press with unprecedented vigor, unleashing a tidal wave of liquidity in a desperate effort to stave off a global economic depression. With the manipulative aplomb of a snake charmer, they have sought to push down interest rates to a point where short term rates in most advanced economies are at virtually zero, while arousing confidence from investors and consumers who would have otherwise have little to cheer about.

The central bankers, in the minds of many, are the heroes of the economic crisis, supposedly saving the global economy from credit atrophy and demand destruction while the feckless politicians stood by helplessly. In case you would otherwise be unaware of the supposedly epic achievement performed by the central bankers, they have engaged themselves in a massive public relations drive during the crisis, paralleling their mega-liquidity dumps, seeking to persuade the public that central banks have become the new temples of salvation in an otherwise bleak economic and fiscal dystopia.

There has now emerged a strong voice that seems be throwing a wet blanket over the self-adulation that has become a by-product of central banks. Jaime Caruana is a name largely unknown to the public at large, but intimately familiar to every central banker. He is the general manager of the Bank for International Settlements; the BIS serves as a global clearing house for central banks.  Here is what Caruana had to say at the recently-concluded annual meeting of the BIS:

“Extending monetary stimulus is taking the pressure off those who need to act. Ultra-low interest rates encourage the build-up of even more debt. In fact, despite some household deleveraging in some countries, total debt private and public, has generally increased as a share of GDP since 2007. For the advanced and emerging market economies , it has risen by about 20 percentage points of GDP, or by $33 trillion — and rising government debt has been the main driver. This is clearly not sustainable. Low rates have allowed the public sector to postpone consolidation at the risk of a further deterioration in sovereign credit quality and damage to longer-term growth. There is plenty of evidence that as public debt surpasses about 80 percent  of GDP, it becomes a drag on growth, because it raises debt servicing costs and uncertainty about the future tax burden; it increases sovereign risk premia; and it reduces the room available for counter-cyclical policy.”

In effect, the general manager of the Bank for International Settlements is warning that the radical steps undertaken by central banks during the global crisis can do no more than buy time for the politicians to get their act together and craft sound economic and fiscal policies that are the underpinnings of sustained growth. To believe that central banks can or should continue their artificial pump priming indefinitely as a substitute for true economic reforms is to evade understanding of the scope and limits of what central banks are capable of.

Caruana offered the following summation:

“Borrowed time should be used to restore the foundations of solid long-term growth. This includes ending the dependence ondebt; improving economic flexibility to strengthen productivity growth; completing regulatory reform; and recognizing the limits of what central banks can and should do.”

Regrettably, none of the steps outlined by the BIS general manager have been implemented in any major advanced economy impacted by the global economic and financial crisis. It is likely that the limits of what central banks can accomplish will only be realized when the next major financial crisis arises.

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

Hillary Clinton Nude

HILLARY CLINTON NUDE

Hillary Clinton Nude

WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

To view the official trailer YouTube video for “Wall Street Kills,” click image below:

In a world dominated by high finance, how far would Wall Streetgo in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.
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Controversy Over U.S. Unemployment Rate Masks The Real Issue Underlying America’s Economic Crisis

October 7th, 2012 Comments off

The Bureau of Labor Statistics latest jobs report suggested  114,000 non-farm jobs were added in September, while the national unemployment rate dropped from  8.1 percent to 7.8 percent. With the U.S. presidential election only one month away, the Republicans naturally claimed that something was fishy about the jobs report. Just as naturally, the Obama administrations maintained that the BLS statistics are compiled by non-partisan professional bureaucrats. So, what’s the answer?

They are both right. The BLS numbers may be honestly compiled, but they are based on abstractions and sampling assumptions, and are frequently corrected long after their original release. Furthermore, the numbers being argued about are the U3 data, which is an incomplete measure of unemployment in the U.S. economy. The more reliable U6 data, which includes part-time workers unable to find fulltime employment, is still well into double digit figures.

The more interesting aspect of the latest LBS data is this; even if the 114,000 new jobs figure is correct, it is below the level required to match new entries into the labor force. In other words, the U3 (and U6) rate should have risen instead of declined. Why didn’t it? Simple explanation: the long-term unemployed are being “removed” from the statistical  measurement of the labor force. If the BLS considers you a “discouraged” worker, you are no longer compiled under the data for unemployed workers. This may look more positive for the upcoming presidential election if you are President Barack Obama, but it does nothing to facilitate economic growth.

There is another dimension to the Bureau of Labor Statistics data which demonstrates its utter irrelevancy to the overall health of the economy. The numbers in the BLS report, or the claims by the Obama campaign regarding total jobs creation since the president took office, not to mention GOP candidate Mitt Romney’s boast that as president, he would somehow “create” 12 million new jobs, miss what is most relevant to a comprehensive economic recovery in the United States.  The real issue is the decline in purchasing power by the U.S. labor force, concomitant with a parallel increase in economic power of a very small financial oligarchy. As is well know by labor statisticians, frequently the new jobs created (or promised) are actually lower paying fulltime jobs, or part-time positions with significantly reduced levels of compensation. The cumulative impact  of this phenomenon has been the erosion in the  size and collective purchasing power of America’s middle-income  labor force, leading to weaker consumer demand and a collapse in housing values.  Neither President Obama nor Governor Romney has on offer a realistic and cogent plan to address the real core issue underlying the factors that have left the U.S. labor force diminished not only in its employee count, but more importantly, in its financial capacity. Until the latter issue is addressed, all the promises made by American politicians for a future economic recovery are political rhetoric and nothing more.

 

          

 

 

 

WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

 To view the official trailer YouTube video for “Wall Street Kills,” click image below:

In a world dominated by high finance, how far would Wall Street go in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.

 

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Inflation Is Not The Solution To The Economic Crisis

August 20th, 2012 Comments off

Almost instantaneously, as soon as governments across the globe went into unparalleled debt to bail out their financial systems beginning in 2008, economists openly were discussing  the impossibility of ever paying back those sovereign loans, and that a different solution was required. The answer, so the economists said amongst themselves, was targeted inflation. In effect, so argued those economists, inflation significantly higher than recent levels, targeted at a level of at least 5 percent, would be “good.”

Why would inflation, a fiscal and monetary circumstance which human beings by instinct regard as an ill omen, be seen in such positive hues by economists as renowned as Nobel Prize winner Paul Krugman? The answer is that inflation is viewed as the ideal solution for eliminating sovereign debts that can never be repaid. In effect, inflation is the methodology by which a nation-state defaults on its loan obligations stealthily. The printing presses expand money supply beyond the level generated through real economic productivity, in the process depreciating the value of the currency. The nation-state , on paper, doesn’t default on its loan repayments, since the contractual obligation is repaid in monetary terms. However, inflation depreciates the value of the currency, so the outstanding loan obligation shrinks in real terms. In addition, so argue the economists, inflation, by destroying the value of money, discourages savings, leading to higher spending and improved economic growth.

It is a neat gimmick, one resorted to by indebted sovereigns throughout history. However, despite claims by economists that precisely targeted inflation has worked in the past, history tells a different story. In the great majority of examples where countries deliberately employed inflation as a fiscal and economic policy, the results were not only counterproductive; very often the social anguish created by the policymakers resulted in political consequences of dire proportions. One can look back at Weimar Germany’s bout of inflation, which went out of control and morphed into rampant hyperinflation. There are many countries that experimented with inflation at levels far less  than those experienced by Weimar Germany and, more recently, Zimbabwe, which still did no good and much harm economically and socially.

The basic problem with modern economic policymaking is that it is too fixated on fiscal gimmickry to resolve core problems. Whether it  is quantitative easing and “Operation Twist” by the Federal Reserve or stealth sovereign bond purchases by the European Central Bank,  the “experts” play fiscal games rather than address the fundamental factors underlying the global economic crisis; flawed systems and economic architectures that have transformed nations that formerly focused on production into entities of debt-financed consumption.  Regrettably, instead of coming to grips with the true underlying factors responsible for the first global economic depression of the 21st century, the economists advising our policymakers look increasingly towards inflation, and the destruction of whatever financial assets are still retained by the increasingly beleaguered middle class, as the last best hope for resolving the sovereign debt crisis.

It is unfortunate that our modern-day economic gurus have not read Santayana, who warned that those who disregard the mistakes of the past are condemned to repeat them.

 

WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

 To view the official trailer YouTube video for “Wall Street Kills,” click image below:

In a world dominated by high finance, how far would Wall Street go in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.

 

 

China’s Hard Economic Landing Appears Imminent

August 1st, 2012 Comments off

As a percentage of GDP, China’s economic stimulus program of 2009 was the largest in the world, and second place to the U.S. in monetary terms. Ironically, the supposedly communist economy of the People’s Republic of China became the last best hope of world capitalism, in the wake of the global financial and economic crisis that began in 2008. Now, it appears, things may be unwinding in a bad way for Beijing.

Copying its capitalist rivals, Beijing’s hybrid government/private economy poured massive amounts of cash into creating new asset bubbles, particularly in real estate. China built shopping malls with no customers, cities with no inhabitants and roads with no traffic. Extravagantly redundant infrastructure was constructed with stimulus money, goosing China’s GDP with annual double digit growth rates. This model was clearly unsustainable; China’s leaders were hoping to buy time so that the nation’s major export markets in Europe and the U.S. would recover with their own stimulus programs, and resume  their buying spree of cheap Chinese goods.

“Kick the can down the road” became the official credo of economic policymakers responding to the global economic crisis. As with other economies pursuing this shortsighted policy prescription, China failed to address the fundamentals of its economic challenge. The proportion of domestic consumption as a share of  GDP in China is less than half the ratio of its customers in the developed world. With its economic ascendancy dependant on overseas customers, the stagnation and contraction of the economies of those customers leaves a void that Beijing cannot cover by building the economic version of sand castles.

With the Eurozone tottering on the edge of the abyss, the U.K. mired in recession and the U.S. growth rate so anemic, even with trillion dollar plus annual deficits, that it is now at stall speed, it appears that the policymakers in Beijing may have lost their stimulus spending bet.  Domestically, the Chinese PMI  (Purchasing Managers Index)  has slumped to the lowest level in eight months. Other indicators, even amid the opaqueness of China’s official economic data, point increasingly towards a hard economic landing  for the world’s second largest economy. The consequences will be dire, not only for  China, but also for the global economy as a whole.

 

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WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

 To view and listen to the YouTube video audio excerpt  “Wall Street Kills,” click image below:

 

 

Sex, murder, financial power and pathological greed come together in the explosive suspense thriller by Sheldon Filger, WALL STREET KILLS: A NOVEL ABOUT FINANCIAL POWER, VIOLENT SEX AND THE ULTIMATE SNUFF MOVIE.
This video provides a free audio reading from chapter one of “Wall Street Kills.” The scene depicted involves two characters from “Wall Street Kills” having a business conversation in a Los Angeles suburb. One character is Peter Hoffman, director of new business development for a secretive Wall Street hedge fund and private equity group. The other character is Daniel Iachino, president of a major independent film company specializing in “adult entertainment” for niche markets. Hoffman is on a mission to investigate if portraying unsimulated violent death in the form of entertainment would be a lucrative business investment. The conversation between the two men quickly focuses on the phenomenon of snuff movies.

 

 

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Dr. Doom Redux: Nouriel Roubini Warns Of Perfect Economic Storm in 2013

July 23rd, 2012 Comments off

He emerged in the months prior to the global financial and economic crisis that erupted in the fall of 2008, warning of a deadly convergence of worrying economic and financial dangers. Nouriel Roubini, economics professor at New York University and owner of his own consultancy firm, issued warnings  that in retrospect seem almost magically prescient. Roubini’s prediction that the contraction in housing prices in the U.S. housing market would metastasize into a devastating financial hurricane seemed so incomprehensively dire, the pundits and eternal optimists on Wall Street dubbed him with the moniker of “Dr. Doom.”

For those not punch-drunk on Wall Street’s propaganda, Nouriel Roubini even issued what amounted to as a checklist of discrete steps that would occur until the investment banks imploded, leading to a fiscal Armageddon. During the summer of 2008, the checkmarks on Roubini’s list of foreboding prognostications accumulated, until Lehman Brothers went bankrupt, and the global economic crisis erupted with fury as credit markets worldwide went into cardiac arrest.

Now, four years later, Roubini is back with his prophecies of gloom and foreboding for the global economy. Dr. Doom has taken to the airwaves, warning policymakers as well as the public that there is a high probability that a perfect economic and fiscal storm will erupt in 2013. Essentially, Roubini’s forecast is as follows; until the November U.S. presidential elections  of this year, there will be a deceptive calm before the storm, as every major economy plagued with severe fiscal problems continues to kick the can down the road. Come 2013, there will be a convergence of several major negative metrics. These include the worsening Eurozone debt crisis, likely leading to the exit of Greece from the monetary union. China will face a hard economic landing, and the United States, its economic growth and job creation performance already anemic, will face a high probability of a renewed economic recession, particularly in a political environment favoring austerity. In addition to those economic factors, there is one other element in the turbulent brew that comprises Roubini’s prediction of a perfect economic storm in 2013; Iran. If the Iranian nuclear issue is not resolved peacefully, which at present seems highly doubtful, there is a high probability of a military conflict occurring in the region, which will add further strains upon the global economy, particularly if oil prices spike to highly elevated levels.

Dr. Doom is back, with  a characteristically gloom-laden warning about likely economic trends for 2013. Unlike the pontificators among the politicians, Wall Street glad handlers and central bankers, Roubini’s analysis of future economic trends does have the virtue of reasoned logic  as opposed to overly-optimistic rhetoric. Finally, Nouriel Roubini’s record in predicting future trends impacting the global economy and financial system has been inherently more reliable than the forecasts offered by the U.S. Federal Reserve, as well as by the policymakers in America and Europe.

 

WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

 To view and listen to the YouTube video audio excerpt  “Wall Street Kills,” click image below:

 

 

Sex, murder, financial power and pathological greed come together in the explosive suspense thriller by Sheldon Filger, WALL STREET KILLS: A NOVEL ABOUT FINANCIAL POWER, VIOLENT SEX AND THE ULTIMATE SNUFF MOVIE.
This video provides a free audio reading from chapter one of “Wall Street Kills.” The scene depicted involves two characters from “Wall Street Kills” having a business conversation in a Los Angeles suburb. One character is Peter Hoffman, director of new business development for a secretive Wall Street hedge fund and private equity group. The other character is Daniel Iachino, president of a major independent film company specializing in “adult entertainment” for niche markets. Hoffman is on a mission to investigate if portraying unsimulated violent death in the form of entertainment would be a lucrative business investment. The conversation between the two men quickly focuses on the phenomenon of snuff movies.

 

 

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Fitch Ratings Agency Downgrades Eurozone Countries

January 31st, 2012 Comments off

Following in the wake of a string of downgrades of the Eurozone, including S & P cuttings its rating on France, Fitch has joined in with its own updated list of woes. Italy, Spain, Belgium, Slovenia and Cyprus have had their sovereign debt ratings cut by Fitch, just before the most recent Eurozone emergency leaders summit on the sovereign debt crisis. It seems surreal that the most recent emergency meeting is on the topic of “economic growth,” just as more quarterly results show  negative growth from various Eurozone members.

It is unlikely that the increased rhetoric emanating form the mouths of European politicians that their monetary bloc is just on the cusp of a new wave of economic growth will impress the ratings agencies. The question then is this; who will investors trust? Will it be the ratings agencies, which are falling all over each other in their ratings cuts and negative outlook with respect to the Eurozone, or will they place their bets on European politicians, who so far are batting a big fat zero in all their multitude of prognostications on the trajectory of the global economic crisis? I suspect the answer will not surprise many.

                 

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World Bank President Warns That Debt and Economic Crisis is Entering “Danger Zone”

August 15th, 2011 Comments off

Speaking at the Asia Society conference in Australia, Robert Zoellick, president of the World Bank, issued a sharp warning on the direction of the global economic and sovereign debt crisis. He told journalists, “I think we are entering a new danger zone and I think that confidence in economic leadership has been slipping and it will be important that the primary economic actors take steps both short and long term to restore that.”

The words of Zoellick reflect unusual candor from a high level policymaker involved in global economic activity.  In essence, he confirms what my blog has been stating for many months; the empirical evidence suggests that the political actors in the major advanced economies are utterly inept when it come to economic and fiscal policy, and their collective incompetence is sending the whole world over a cliff.

 

 

                 

A Keynesian Leap Off the Financial Cliff

February 21st, 2010 Comments off

A highly tangible outcome of the global economic crisis and its first stage, the so-called Great Recession, has been the deleveraging underway by households and businesses throughout major advanced economies. In the United States and United Kingdom, consumers who boosted consumption on the basis of easy credit as opposed to higher disposable incomes are now tightening their belts and battening down the hatches. The predictable result has been a decline in aggregate demand. This is where the neo-Keynesians enter the fray, preaching the gospel of mega-deficit spending by governments.

The classical economic theory as developed by John Maynard Keynes holds that in times of severe economic contraction in the private economy, it is permissible for the sovereign to go into debt and increase spending to compensate for the falloff in consumer and other private sector expenditures. The rationale is that this short-term increase in the public debt will retard the rise in unemployment, limit the impact and duration of the economic recession and in the long run lead to overall better economic performance, with limited effect on the ratio of public debt to GDP. Though advocates and opponents can offer differing views on the historical validity of Keynes and his counter-cyclical concepts of sovereign  intervention in the economy, there is no doubt that his theory is intellectually cogent and based on a serious analysis of economic problems, particularly in regards to the Great Depression of the 1930s. However, is the current wave of unprecedented sovereign indebtedness equally cogent? If John Maynard Keynes were still alive, he would likely take issue with the massive tidal wave of red ink being unleashed by politicians as their antidote to the global economic crisis.

Though John Maynard Keynes is portrayed as a deficit-loving interventionist, in reality he was not. What is left out of the description of his theory in regards to counter-cyclical fiscal policy is that Keynes also believed that in times of relative prosperity sovereigns should create budget surpluses. He belief was that booms and busts were an integral characteristic of modern capitalism, and that  the accumulation of reserves during times of plenty would enable governments to engage in temporary deficit spending to combat a severe recession, without creating the long-term danger of exploding national debt to GDP ratios. This is an aspect of Keynes’s views on fiscal policy that has been conveniently forgotten by the modern interpreters of Keynesian economics.

Since World War II, the U.S. has seldom run balanced budgets. If generally accepted accounting principles were applied to official U.S. federal government budget reports, which require taking into account future liabilities for Social Security and Medicare, then during this period the United States has always run large fiscal deficits, even during times of relative economic prosperity. What this means in reality is that the conditions laid out by John Maynard Keynes for allowing a sovereign to engage in deficit spending during a recession, namely building budget surpluses during periods of economic expansion, have never been adhered to.

During the Great Depression,  the U.S. government did engage in substantial deficit spending within the framework of the New Deal, but with a ratio to GDP far lower than what is currently occurring on President Obama’s watch. This fiscal policy was engaged in with a cumulative national debt to GDP ratio nowhere near the current level, and with a large base of domestic savers prepared to buy U.S. government debt, in contrast with the present day reliance on foreign buyers of U.S. Treasury Bills.

If John Maynard Keynes were alive today, I suspect he would be horrified at the manner in which his economic theories have been distorted, and the likely outcome of such fiscal profligacy.