Associate editor and weekly columnist Gil Smart writes in “The risks and rewards”:
“The writer Charles Hugh-Smith published a deceptively simple piece on his blog ‘Of Two Minds’ last week that spoke of what he called the ‘Grand Tradeoff.’ Central states like the U.S., he wrote, have made expansive promises to their citizens, vowing to ensure economic security for all citizens. ‘permanent financial security via guaranteed mortgages, bank deposits, pensions, education and health care, and high growth to pay for it all based on ever-expanding innovation.’ The problem: ‘If everyone is promised financial security, a premium is placed on risk avoidance and complicity with the status quo … which fosters a low-risk, low-innovation, low-growth economy that is incapable of expanding fast enough to fund all the grandiose promises of rock-solid security made to its citizens.’…
“Societies like ours, he wrote, have committed to
“Yet what if Hugh-Smith is correct? This may help explain the financial crisis of 2008, and suggest another may be inevitable. To generate the growth we have required, financial bubbles are necessary… “ (more)
WATCHDOG: Nonsense. Take a look at the nation’s greatest entrepreneurs and our local business successes. Most come from secure, upper middle class backgrounds. Entrepreneurs and business leaders are born with a desire to excel. They don’t need flagellation to put them to work. We can testify to that.
As for the 2008 type total economic meltdown being necessary and inevitable, it was in large part a result of unbridled financial manipulations resulting from the repeal of half century old governmental regulations and the failure of law makers and governmental agencies to intervene to check new abuses . We simply turned our backs on all we had learned from the Great Depression.
Lastly, what is the matter with a democratic society with an advanced economy seeking to provide a minimal level of security for all of its citizens so they have an opportunity to enjoy a ‘good life’? What could be a better goal? Life shouldn’t have to be a choice between gated communities or skid row. We can learn from the Scandinavian nations.
Our problem isn’t costs, it’s perhaps 12% of our working population either being unemployed or having given up seeking employment. Get them back to work and we will return to Clinton years prosperity and balanced fiscal budgets. But that requires economic stimulus to break out of this moribund economy.
With all due respect, the FED has been stimulating to the tune of 80 billion a month with no end in sight. That’s almost a trillion dollars a year and 7 trillion if the multiplier effect is considered.
The recommendation seems to be to spend like crazy and we’ll figure out how to fix the consequences later. Responsible proposals should say 1) How much stimulus. 2) Since stimulus implies huge debt, how does the debt get repaid and on what schedule?
Until we can get a real plan on which we can agree the more stimulus won’t happen. Some treat economic theory like religion and stimulus like the proverbial “Hail Mary” pass.
EDITOR: Absolultely. What most prominent economists have recommended over the past few years has been more stimulus at the outset to accelerate recovery. Then reduction of federal expenditures and increases in taxes to replicate what occurred over the latter Clinton years, when it looked as though the danger was totally paying off the national debt.