It began as a subprime surprise, became a credit crunch and then a global financial crisis. At last week’s World Economic Forum in Davos, Switzerland, Russia and China blamed America, everyone blamed the bankers, and the bankers blamed you and me. From where I sat, the majority of the attendees were stuck in the Great Repression: deeply anxious but fundamentally in denial about the nature and magnitude of the problem….
[Leaders] need to grow up and face the harsh reality: The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital.
The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.
insightful. Of course, one way to reduce debt is to increase taxes.
#1: Yes, provided people pay them. (Mr Geithner, Mr Daschle, call your office).
The other way is to reduce expenditure. That’s how my household stays solvent.
This is to say nothing about evidence that suggests reducing taxes tends to increase revenue. Raising taxes is posited on the idea that the government can spend my money better and more fairly than I can.
Yes, increasing taxes will do wonders for those trying to reduce their consumer and commercial debt. And we can see now how Washington is trying desperately to rein in spending….right after blowing $1 trillion on a bill chock full of pork.
Buy gold.
CBO says recession will end in second half of 2009 WITHOUT stimulus package; the stimulus package will actually make things worse.
http://www.cbo.gov/ftpdocs/99xx/doc9958/01-08-Outlook_Testimony.pdf
And John (#1) – its our damn money. We are not thralls of the government.
So, did you hear about the move by appx 20 states to regain [url=http://www.fontcraft.com/rod/?p=849]State Sovereignty[/url] from the Federal Government? Quite a movement.
[blockquote]there’s a quiet movement afoot to reassert state sovereignty and stop the uncontrolled expansion of federal government power. Almost half of the state legislatures are considering or have representatives preparing to introduce resolutions which reassert the principles of the 9th and 10th Amendments to the Constitution and the idea that federal power is strictly limited to specific areas detailed in the Constitution and that all other governmental authority rests with the states.
Arizona makes the clearest statement of the intent to block unfunded mandates:
“That this Resolution serves as notice and demand to the federal government, as our agent, to cease and desist, effective immediately, mandates that are beyond the scope of these constitutionally delegated powers.â€
and
“That all compulsory federal legislation that directs states to comply under threat of civil or criminal penalties or sanctions or requires states to pass legislation or lose federal funding be prohibited or repealed.â€[/blockquote]
Yep, quite interesting.
Well, Obama did want to be compared to Lincoln. Why not a State’s Rights movement to cap that comparison?
Grinning in Florida (not one of the 20),
Jim Elliott
Of course the best way to reduce debt is to reduce tax rates and cut spending. That’s worked in the past quite successfully with JFK and RWR.
Niall Ferguson tend to take a long and broad view of things. If he thinks the old ways won’t work this time because this is a different animal than past recessions or depressions we should probably be perking up our ears.
#2 – azusa, you are quite an optimist!
There is plenty of evidence that indicates people are irrational when it comes to money. People are generally short-sighted and greedy. Sometimes they learn, sometimes they don’t. And if you work in the advertising industry, you deliberately encourage irrationality. Individuals won’t get together, for example, and fund things that make sense like roads and schools and those sorts of things. And if they do, it looks a lot like government.
Reducing taxes sometimes increases revenue. When you have an initial tax cut, businesses and individuals may sell their stock at a lower rate. They will decide not to keep the money invested in their company. But yes, in the beginning, there is some increase in revenue.
But not for the long term. There isn’t much evidence that long term tax cuts bring in revenue. And it seems to work only because the government – at some time – spent a lot of money on infrastructure. Our businesses NOW benefited from the taxes people paid in the past on projects we take for granted. and anyone who has ever gone to a public institution, or used one, from a school to a library, to the police to the legal system should eventually recognize that these things cost money. And as any capitalist will tell you, you get what you pay for.
If you want a poorly run government, don’t pay anybody to run it, or find people who hate government to run it. Or denigrate those who choose to serve for the sake of public service.
John, your comments about tax cuts demonstrate clearly that you know nothing about economics, economic history, fiscal and monetary policy or human nature.
#10 tu quoque, my friend. Until you decide to back it up with numbers, or history, or monetary policy, or some anecdotes about human nature.
“Tax cuts” is a religion foisted upon the American public by the wrecking crew of entrepreneurial pundits who could only create value by talking about their religion. As like other religions, sometimes it seems true if you really believe it. You fit the evidence into the religion as much as you can.
“Voodoo economics.” Until you can find me a business that didn’t benefit from individuals having public schooling, doesn’t use roads you and I paid for, would be comfortable without police or firemen, a commercial society requires government regulation. In part because people are greedy, or they are suckers. Remember that idea – “sin?” it exists. Even in the market.