Mark in Oshawa
8th February 2009, 20:25
In this column in today's Toronto Sun (Feb. 8) Eric Margolis had this to say:
PARIS -- Last month, Russia's Vladimir Putin went to the economic jamboree in the ugly little Swiss town of Davos and blasted western capitalists for causing the current global financial disaster.
With delicious irony, Putin took special aim at the United States for allowing Wall Street fraudsters to build a financial house of cards that wrecked capitalism.
Meanwhile, social unrest simmers across Europe as unemployment surges and government handouts fall sharply.
European and Asian governments are deeply concerned that President Barack Obama's multi-trillion dollar economic rescue package may prove far worse than the sickness it is meant to cure.
Politicians everywhere are panicking as voters demand they do something to keep their debt-driven economies running in high gear. This is impossible. The debt bubble has burst. But politicians are afraid to tell voters the hard truth: The party is over. Retrench, stop borrowing, cut spending, start saving, live smaller.
The U.S. economy, 25% of the world's total, had become fatally addicted to the steroid of debt. Consider this: America's total national debt (liabilities) amounted to 3.5 times its gross domestic product (assets). The U.S. treasury kept running on loans from China and Japan.
Now Obama and his team of Democratic Keynesians hope to spend the U.S. out of deep recession by dishing out $2.2 trillion in aid and stimulus packages.
OTTAWA'S ANSWER
Ottawa also plans massive deficit spending to placate voters and give the impression it is overcoming recession. Paris is being much more cautious. Canada and France are in the best shape of the western economies.
Ottawa's planned spending binge will produce a huge debt hangover, likely never be repaid, and a debauched Canadian dollar. All the impressive achievements of the past decade in making Canada's economy sound will be thrown away by a supposedly conservative government.
Massive deficit spending is like treating a poison victim with more big doses of poison. The current crisis was caused by runaway borrowing by the Bush administration, individuals, hedge funds, and the unregulated "shadow" financial industry. Obama's remedy: Borrow $2.2 trillion more.
Europeans are gravely concerned that Obama's spendfest eventually will ignite worldwide inflation, undermine the U.S. dollar and raise U.S. interest rates. Since the U.S. runs on borrowed money, any decline in the value of its currency will require higher interest rates to be paid to foreign investors to make up for their added risk.
Europeans have a well-justified horror of inflation. The storm of inflation in the 1930s was the financial equivalent of the Black Death, and led directly to fascism. Europe fears the U.S. is stoking inflation in hopes its vast foreign debts (about $1.2 trillion to Japan and China alone) can be paid back in depreciated dollars. We've seen such financial chicanery before and it leads to disaster.
As one involved for nearly 50 years in business and investments, my advice to the young president is to tell Americans to patiently accept a long period of hardship and hangover, tighten their belts, and start living within their means.
The government should investigate all the bankers, realtors, money managers and financial alchemists who created the criminal bubble economy of debt. Bernie Madoff was not alone. Time for handcuffs, not golden handshakes.
The best way to stimulate the ailing economy is to cut taxes. Let people decide how to spend their money. Washington and Ottawa's plans for new bridges and day care centres will win votes, but won't revive the economy. Japan tried this and it failed.
Cut government spending, half the Pentagon's bloated budget (50% of world military spending when there are no regular military enemy forces left to fight.)
President Franklin Delano Roosevelt launched mass social welfare schemes in the 1930s similar to ones that Obama is proposing. Roosevelt's New Deal may have staved off popular revolution but it did little for the economy. It took goading Japan into war to end the Depression. Let's hope Obama does not intend to follow this example in Afghanistan.
PARIS -- Last month, Russia's Vladimir Putin went to the economic jamboree in the ugly little Swiss town of Davos and blasted western capitalists for causing the current global financial disaster.
With delicious irony, Putin took special aim at the United States for allowing Wall Street fraudsters to build a financial house of cards that wrecked capitalism.
Meanwhile, social unrest simmers across Europe as unemployment surges and government handouts fall sharply.
European and Asian governments are deeply concerned that President Barack Obama's multi-trillion dollar economic rescue package may prove far worse than the sickness it is meant to cure.
Politicians everywhere are panicking as voters demand they do something to keep their debt-driven economies running in high gear. This is impossible. The debt bubble has burst. But politicians are afraid to tell voters the hard truth: The party is over. Retrench, stop borrowing, cut spending, start saving, live smaller.
The U.S. economy, 25% of the world's total, had become fatally addicted to the steroid of debt. Consider this: America's total national debt (liabilities) amounted to 3.5 times its gross domestic product (assets). The U.S. treasury kept running on loans from China and Japan.
Now Obama and his team of Democratic Keynesians hope to spend the U.S. out of deep recession by dishing out $2.2 trillion in aid and stimulus packages.
OTTAWA'S ANSWER
Ottawa also plans massive deficit spending to placate voters and give the impression it is overcoming recession. Paris is being much more cautious. Canada and France are in the best shape of the western economies.
Ottawa's planned spending binge will produce a huge debt hangover, likely never be repaid, and a debauched Canadian dollar. All the impressive achievements of the past decade in making Canada's economy sound will be thrown away by a supposedly conservative government.
Massive deficit spending is like treating a poison victim with more big doses of poison. The current crisis was caused by runaway borrowing by the Bush administration, individuals, hedge funds, and the unregulated "shadow" financial industry. Obama's remedy: Borrow $2.2 trillion more.
Europeans are gravely concerned that Obama's spendfest eventually will ignite worldwide inflation, undermine the U.S. dollar and raise U.S. interest rates. Since the U.S. runs on borrowed money, any decline in the value of its currency will require higher interest rates to be paid to foreign investors to make up for their added risk.
Europeans have a well-justified horror of inflation. The storm of inflation in the 1930s was the financial equivalent of the Black Death, and led directly to fascism. Europe fears the U.S. is stoking inflation in hopes its vast foreign debts (about $1.2 trillion to Japan and China alone) can be paid back in depreciated dollars. We've seen such financial chicanery before and it leads to disaster.
As one involved for nearly 50 years in business and investments, my advice to the young president is to tell Americans to patiently accept a long period of hardship and hangover, tighten their belts, and start living within their means.
The government should investigate all the bankers, realtors, money managers and financial alchemists who created the criminal bubble economy of debt. Bernie Madoff was not alone. Time for handcuffs, not golden handshakes.
The best way to stimulate the ailing economy is to cut taxes. Let people decide how to spend their money. Washington and Ottawa's plans for new bridges and day care centres will win votes, but won't revive the economy. Japan tried this and it failed.
Cut government spending, half the Pentagon's bloated budget (50% of world military spending when there are no regular military enemy forces left to fight.)
President Franklin Delano Roosevelt launched mass social welfare schemes in the 1930s similar to ones that Obama is proposing. Roosevelt's New Deal may have staved off popular revolution but it did little for the economy. It took goading Japan into war to end the Depression. Let's hope Obama does not intend to follow this example in Afghanistan.