The effects of the stimulus are all but over and Western Economies are turning towards Austerity as a way out of the Great Recession. Further stimulus is pretty unlikely as who could we turn to to lend us the money to do so? A jobless recovery is unsustainable as it brings no expansion to the market. Our national security has been put at risk by neo-con adventurism as Friedman pointed out the other day we cant afford to fight our way out of a paper bag.
We squandered what stimulus we had by shoring up a failed banking and financial system without imposing drastic change hence we still have a failed economic model in place. The banks are reluctant to lend yet their bonuses remain little changed.
Sentiment wherever you go is at best cautious and at worst forecasting a double dip recession. I don't know about you, but I work with the chemical industries and have not seen any sign that we have come out the first dip let alone talk about a double dip. The perception in the non financial world is that we are still in a recession that could in fact intensify.
Dr Roubini said the US growth rate was likely to fall below 1pc in the second half of the year, despite the biggest stimulus in history: a cut in interest rates from 5pc to zero, a budget deficit of 10pc of GDP, and $3 trillion to shore up the financial system.
The anaemic pace compares with rates of 4pc-6pc at this stage of recovery in normal post-war recoveries.
It seems to me that economists are in general at a loss to present a way forward other than by self-strangulation via austerity. What this means is in reality we let slip all our social gains and protections so hard fought for, and when taxation was fairly distributed highly successful. Hence we have 'cat food commissions' springing up across the western world. The sole aim of these appear to be forcing us to work longer, expect less return on our investment, meanwhile shoring up the riches of the top 1%.
Krugman points out today
The economic moral is clear: when the economy is deeply depressed, the usual rules don’t apply. Austerity is self-defeating: when everyone tries to pay down debt at the same time, the result is depression and deflation, and debt problems grow even worse. And conversely, it is possible — indeed, necessary — for the nation as a whole to spend its way out of debt: a temporary surge of deficit spending, on a sufficient scale, can cure problems brought on by past excesses.
We failed in the first stimulus because we concentrated our wealth into shoring up a broken system rather than taking a bold leap and doing something new. We could have driven our economy by stimulating what created our wealth in the first place.
1] Investing in our existing rotting infrastructure.
2] Pushing boldly ahead with the green economy.
3] Imposing a fair tax system both on personal income and corporate profits.
4] Being bold and financing research and development to the hilt.
These would have all created jobs, their would have been screams about tax but only from the few that could really afford the increase. 10 to 20% unemployment is unsustainable without austerity measures, but the reason for this unemployment hence lack of economic growth is maintaining a failed economic model.
The song from the top 1% is that we cannot afford our social policies, they are correct as long as we support their excesses. Austerity will only drive our post WWII advances backwards and will not benefit anyone but the already excessively rich.
We are at an economic D-Day
Which direction will we take, hide behind our preconceived ideas and rot, or break the rules of how we do business and aim high?