Sarah Palin and her tea party movement need to learn the painful lessons being experienced in the U.K.
While being frugal and cutting wasteful spending is a great goal we need to be very careful of not going too far as austerity can have painful affects upon a economy.
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The current QE (300 billion / yr) is going into long dated treasuries — the fault of austerity?
@scavenger,
yes the cause for it along with other spending
There is nothing wrong with going the Hyperinflation route which is the only other alternative, you just have to be honest and communicate to the public that the supply chain will stop working at some point within 3-4 years and you will not be able to buy food unless you can afford a $30 Del Taco burrito. Those that think we can somehow stimulate the economy through more QE and that will generate a better outcome are clueless. Truly.
Denninger has been wrong on a number of secular calls, but his statement below is the absolute truth and would have been the best solution but the banking industry wanted its bonuses. They need to take a huge hit to restore the moral order of this country.
“Creative destruction” would have taken care of the rest – the bad institutions would have gone under, bankruptcy would have been rampant, but from the ashes there would have been a massive rebound in the economy and the clouds would lift – with about half the debt in the nation gone.”
@Sierra,
The idea of QE is to hope that recovery takes place during a stimulus type of confidence building.
Creative destruction would be alright if the largest banks, and i mean all of the largest banks globally would not topple.
With so many of them toppling it would have created more problems than the route we took. Problems to the point of complete shut down of the worlds economy.
The shut down would have created a even larger derivatives bubble to burst including currency blow ups.
Then your faced with a world where war for basic resources is a potential course of action….not good to say the least. Economic warfare is more desirable.
The way to go about this is to systematically divide the largest banks into appropriate divisions so that if a division goes belly up, even sector wide, it does not disrupt the system as a whole.
and further more those responsible for collusion, gross negligence, and conspiracy should become lifers in jail.
This was a scenario where even the CEOs knew what was going on and did not worry since they had central banks and taxpayers to rely on.