Where is the US economy headed?

Yes, it is a complicated formula. If taxes rise on all income, then there is little to no reason to change investment based solely on the increased tax. If taxes rise on only one form of investment income then it changes the risk/reward per investment which may drive people to another investment.

But you do seem defensive. Almost as if you consider it a fault to be influenced by your choice of reading material. Especially a site claiming to be seeking alphas.

They already did didn't they?

The U.K. is officially in a double-dip recession. It will be interesting to see US numbers over the next few months.

JPB wrote:

The U.K. is officially in a double-dip recession. It will be interesting to see US numbers over the next few months.

I think the lessons are pretty clear at this point: Austerity does NOT WORK. It does not help an economy recover from a recession or period of instability. It does not lead to job growth or restore confidence in the country.

Cycloptichorn

Cycloptichorn wrote:

JPB wrote:

The U.K. is officially in a double-dip recession. It will be interesting to see US numbers over the next few months.

I think the lessons are pretty clear at this point: Austerity does NOT WORK. It does not help an economy recover from a recession or period of instability. It does not lead to job growth or restore confidence in the country.

Cycloptichorn

Perhaps then the Greeks should change their policies and resume issuing bonds to stimulate their economy.

Deficit spending works well up untiol the moment when it ceases to work at all. Catastrophe follows.

The Big Wrong

It’s Official: Keynes Was Right, says Henry Blodget. Recent election results in Europe seem to have raised consciousness in a way literally years of economic data couldn’t: the austerity doctrine that has ruled European policy is a big fat failure.

I could have told you that would happen, and sure enough, I did. Did I mention that after three years of dire warnings that the bond vigilantes are attacking, the interest rate on US 10-years remains below 2 percent?

It’s important to understand that what we’re seeing isn’t a failure of orthodox economics. Standard economics in this case — that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks — was the Keynesian position. The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite.

And now the results are in: Keynesians have been completely right, Austerians utterly wrong — at vast human cost.

I wish I could believe that this would really be enough for us to move on and consider what can be done, now that we know that the ideas behind recent policy were all wrong. But that’s wishful thinking, I suppose. Nobody ever admits that they were wrong, and Austerian ideas clearly have an emotional and political appeal that is resilient to any and all evidence.

Do you not know, my son, with how little wisdom the world is governed?

That's an interesting philosophical point, but it has no relevance to what we are currently seeing in England.

Double dip recession proves Osborne wrong

Apr 252012


The UK is on double dip recession.

Osborne offered us his vision two year ago. It was of “expansionary fiscal contraction”.

His argument was that the more he cut government spending the more people would spend, liberated by knowing that if he succeeded in his aim of balancing the budget tax cuts would follow, letting them repay debt they’d take on now to spend. It hasn’t happened. People who face the prospect of unemployment, increased cost for things that were previously provided by the state, lower pensions, higher cost of childcare and the uncertainty of recession have simply stop spending.

And Osborne argued that as government cutback business would rush to fill the space that he would create in the economy because they would be liberated from the yoke of government interference in their activity. It hasn’t happened. Businesses have seen that their biggest customer is not spending and have cut their investment, reduced their employment plans, closed their premise, withdrawn from the High Street and battened down their hatches in the hope of survival: the last thing that they have done is expand.

Of course, all of this was completely predictable, and was predicted. I was one of those who did so. With the Green New Deal group I suggested an alternative approach to fending off recession as long ago as the summer of 2008, before the banking crisis developed. Osborne ignored us then, and I have little doubt that he will ignore us now but the price that we will pay for that will be an enormous one.

I suspect that during the course of this year we will come out of recession, but only just.

Much more importantly, I think unemployment will continue to rise as this year progresses, with there being no prospect of any real reversal in site at any time in the foreseeable future as the government continues its programme of reckless cuts that guarantee a continuing downward spiral in confidence that will reduce investment for years to come, and at the same time will destroy any hope of creating a balance in our economy, or, just as importantly, a balance in our budget.

There is only one way to restore that balance in our economy and that is for the government to spend now on the creation of new infrastructure projects, new green energy projects, on the backlog of repairs that need to be undertaken in our public sector properties, in providing services that people need, and in investing with business in our future in sectors such as non-carbon energy.

This spending will, of course, require additional funding, but there is over £2 trillion invested in pensions at present in this country with more than £900 million (or thereabouts) in the larger pension funds. In that case money seeking a proactive home on which a positive return can be paid does exist. In addition, business itself has £750 billion of cash on its balance sheets right now, none of which is being spent. It is this combined cash that has to be brought into use in our economy if we are to get out of recession and nothing George Osborne is doing will achieve that goal.

We don’t, as a result, need corporation tax cuts for big business right now: we need them to pay more tax now so that investment can take place to fund demand for their products. That gets the business cycle going again.

And we need a condition to be placed on pension tax relief saying that 25% of all money going into tax funded pension arrangements has to be invested in projects that can create jobs in the UK right now.

Simple measures like that could get us out of recession. Nothing Osborne is doing can.

It is time for change.

That's right; the Greeks should spend more, not less to revitalize their economy. What the enforced austerity program is doing to Greece is a slow death.

The US deficit grew over 100% of GDP during WWII; not much of consumer goods and services were being produced - mostly war machines.

Not many people complained about the spending back then, because spending was necessary to survive. It's the same today as it was 70 years ago.

But Cyclo hit the nail on the head; Greek's problems far exceeds what is normal in any economy. They don't have the wherewithal to stop all the fraud that's been going on for too long.