1. In the United States, large amounts of household debt (especially mortgages) incurred during the past two decades cannot be repaid, while in Europe large amounts of sovereign debt could be repaid only on terms that would prove ruinous (see Keynes’ sadly prescient 1919 book, The Economic Consequences of the Peace). We need new mechanisms for lightening these debt burdens and allocating losses so that demand-led growth can resume and social stability can be preserved....2. The European Union cannot remain where it is. If its members cannot agree to move forward to more centralized institutions of economic management, then it must move backward by loosening the restraints on member-nations and permitting (or even requiring) individual nations under stress to suspend or terminate their participation in the euro....3. Here at home, we must go back to the fiscal drawing-board and implement what economists across the political spectrum recommend—another round of stimulus (well-crafted this time) as part of a package that stabilizes our debt-to-GDP ratio no later than the end of the decade....4. The “Grand Bargain” that matters most is not between Democrats and Republicans, but rather between the United States and China. The world’s two largest economies must finally renegotiate their unbalanced and unsustainable relationship. Just as OPEC learned that a policy of pushing oil prices ever higher eventually yielded negative returns, so China must be brought to realize that a policy of seeking to maximize its exports will eventually undermine itself by slowing growth, and eventually demand for exports, in other countries....
Read the whole article at The New Republic, Four Actions the Global Community Must Take to Avoid Another Depression
William Galston of the Brookings Institution seems to be a deficit dove, but otherwise good recommendations.
6 comments:
Why are these concepts 'statesmanship', 'equilibrium', 'global trade balance' so prominent in western ideology and economic thinking nowadays?
Have people forgotten that we have a resource-based system in which resources are growing scarcer by the minute and that mankind has always conformed to survival of the fittest social darwinist principles, when their self-interests are at stake?
Look at the US over the past 30 years - it is a prime example of this in action.
A global depression may not be a bad thing - we need a major purge within society if mankind is to evolve.
"A global depression may not be a bad thing - we need a major purge within society if mankind is to evolve."
Increases the risk of war, hardly a good idea in a nuclear, not to mention widespread human suffering, increasing poverty, etc. All in all, a very bad "solution."
We have 7 billion people on this planet and limited resources.
Are you saying that there is no war currently? What is happening right now is a piecemeal solution, I'm advocating a comprehensive solution in which we purge a large part of the world population in one go and preserve only the best and brightest.
Only then can mankind start evolving instead of being at a crossroads or experiencing de-evolution as in the case of the US.
Have at. I hope you and your DNA survive.
William Galston wants “another round of stimulus (well-crafted this time) as part of a package that stabilizes our debt-to-GDP ratio no later than the end of the decade..”
Load of rubbish! The debt-to-GDP ratio needs to be whatever satisfies private sector savings desires. If Americans turn into Japanese style savers who want to store up piles of near zero interest earning government debt, then so be it. There’s no harm in that.
Actually, another round of "well-crafted"* stim would increase GDP growth, reducing the denominator. It would also decrease the numerator (deficit) by increasing revenue and decreasing the automatic stabilizers.
* A well-crafted stim would include a payroll tax cut, amping up automatic stabilization, and increasing public investment. Forget across the board tax cuts that favor savers who are unlikely to use the extra funds to increase effective demand.
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