What is particularly fascinating with John Maynard Keynes is that he wrote a theory that only works on paper since it assumes that monetary, political and financial managers will never abuse the power of indebtedness. So, what to think of this worldwide credit squeeze and its implemented cure that is no more less the cause of the disease and could spiral at any moment into a 'Greater Depression?' This week Gregory
Mankiw, a professor of economics at Harvard, wrote a piece in the NYTimes asking openly what Keynes would have done to deal with the crisis.
Just another nice but failed attempt to praise the Keynesian fairy tales. Mankiw cites the observation which links the root cause of economic downturns to insufficient aggregate demand. What demand when the consumers are completly tapped out in the first place? How can world governments create demand when they are literally bankrupt? World stability hangs by a thread and this illusion is now being tested, http://slotoff.com/
To see what will happen next, we need to look at what is happening to the most peaceful country: Iceland. The political bubble is indeed bursting: in early December, Icelanders stormed their central bank after the realization that their country (viewed as 'The Happiest Place On Earth' - and with 0% unemployment rate) had been brought down by a wave of concealed toxic debts and CDOs coming back home to roost. They demanded the ouster of bankers responsible for the meltdown.
The ouster is a very soft alternative to a life sentence in jail, which would be a lot more appropriate. Policy makers and bankers are generally untouchable. Resigning and banishment are often the worst punishments that could happen to them. How fair and impartial is this? How long will it take world citizens to realize that we're free range chickens and act against financial serfdom? As you read this, the American bailout is reaching epic and fatal proportions of more than 8 trillion and the worst is not over yet.
Actually, the current trends are already much worse than depression, though because of some banking toxic tricks and frauds, risks are being constantly shifted down the social ladder deteriorating the consumers purchasing power for ever. There's nothing that can rescue the system as the crisis was built into the system itself. Although this has not be aired on any major TV broadcast, when the world Leaders got together to discuss our fate last October, they admitted to being incapable of doing anything.
That we are all scr*w*d. The Australian ministerial statement by Kevin Rudd sums it up pretty well while acknowledging that the global wealth destruction amounts to $27 trillion - and that is far from over. Among many other terrifying recent events, discount window borrowing (from the Fed. Reserve) in the week ended Oct 15 averaged a record $437.5 billion per day, surpassing the $420.2 billion rate in the prior week... please note that it is not included in the cumulative 8 trillion package!
In a debt-based economy, competition translates into a 'great crash enhancer'. Take this housing bubble, its engineers, which couldn't anything to stop the infectious exuberance, figuring that market saturation would eventually have the last word . This didn't prevent them from firmly believing that prices had some room to run up... and everybody competed to get the very last piece of the pie. What is truly outraging is that we boarded onto the Titanic because Credit Rating Agencies sold us a fictive 'star system', which has led us to a triple A junk status.
Please watch this PBS.org video. At 9:27 minutes, you will hear: CDOs complex securities concocted by math geniuses and PhDs... the only problem is that they didn't have any data to rely on... and why did they get a "go" anyway?... because there was the stake$ were too huge... the more triple A debt rating products on the market the more business "they" get (paraphrasing) Perhaps you remember my editorial - Global Junkification - mentioning that the global leverage is about $400TN or so, and that the world G.D.P less than $70TN.
This big picture helps uncover the hidden goal of fractional banking and its ensuing elementary conclusion: that Fiat money, which is backed by confidence only, is designed to eliminate competition, one step at the time. Now the new scheme is the 'global currency', which is going to consolidate the field of banking even further during/after the 'Great Deleveraging'. By the way, 'deleverage' is again one of those convoluted terms invented to mask reality.