Phony growth, or phony austerity? Pick your poison.
Europe鈥檚 austerity policies nor America鈥檚 growth policies have worked. In Europe, governments collectively spent 44.8% of GDP in 2000. Today it is 49.2%. That鈥檚 not austerity, that鈥檚 stimulus, according to Bill Bonner.
Europe鈥檚 austerity policies nor America鈥檚 growth policies have worked. In Europe, governments collectively spent 44.8% of GDP in 2000. Today it is 49.2%. That鈥檚 not austerity, that鈥檚 stimulus, according to Bill Bonner.
How about real austerity? Real growth?
Today, we introduce a new twist on these Daily Reckoning remarks鈥� The new approach is that we are going to write less. Yes鈥e promise! Long term Daily Reckoning sufferers have heard this before. But this time, we really mean it. Honest injun.
And to prove we are serious, we鈥檙e keeping today鈥檚 comments to just two pages鈥nd only one subject. An old one.
We live in a world of frauds and counterfeits鈥unkum and claptrap鈥�
That鈥檚 what makes it so much fun! It brings tears to our eyes one day鈥nd seizures of laughter the next. So many imposters鈥o little time.
As you know, neither Europe鈥檚 austerity policies nor America鈥檚 growth policies have worked. Why? Because they are both phony.
In Europe, governments collectively spent 44.8% of GDP in 2000. Today it is 49.2%. A big increase. That鈥檚 not austerity鈥hat鈥檚 stimulus. The Europeans are letting out their belts, not cinching them up.
And now that the phony austerity is not working, a new batch of leaders wants to try something new 鈥� phony growth. Francois Hollande, France鈥檚 new president, says he will hire more government workers and spend more money to promote 鈥済rowth.鈥� He also says he鈥檒l raise taxes on the rich to 75% of marginal income (up from 41% now) and increase the 鈥渨ealth tax.鈥� How he thinks you get real growth out of this foul mixture is a mystery. The government already directs and consumes half the nation鈥檚 output鈥nd the economy is flat. How will it do better with more money? Instead, the French will be wasting resources鈥queezing the most productive part of the economy鈥nd getting poorer.
Meanwhile, the US has stuck to its phony growth policies. The feds run huge deficits to 鈥榮timulate鈥� the economy.
We saw yesterday where all that money has gotten us. Nowhere. Family wealth has dropped back to levels of 20 years ago.
But wait鈥aybe it鈥檚 not the feds鈥� fault. While the Europeans pretend to cut back, maybe America鈥檚 stimulus program is a fraud too. That鈥檚 what a pair of professors at Yale claim. This 鈥榬ecovery鈥� is different from previous recoveries, they believe, because the US is following a 鈥渉idden austerity program:鈥�
So, dear reader, pick your poison. Phony growth? Or phony austerity? Neither works. What does work? What would turn this economy around鈥nd put it back on the road to real growth? We鈥檒l tell you next week. We鈥檙e out of space for today.
Regards,
Bill Bonner,
听蹿辞谤 The Daily Reckoning