So stated George Soros, at a discussion on the economic crisis in the EU in Copenhagen, Denmark on Monday ( April 16, 2012). The billionaire Hungarian-born, US citizen, hedge-fund operator, philanthropist, author and economist, was born in Hungary in 1930, and is a graduate of the London School of Economics. He is chairman of the Soros Management Fund, and developer and proponent of the economic concept of "reflexivity" used to predict responses of markets to various stimuli. Soros is also the 46th richest man in the world (at $22 billion US dollars) and the author of many books on politics and economics.
As reported in Reuters (April 16, 2012) Soros believes the crisis in the Eurozone is deepening. The financial crisis is sadly the cause of tension within the zone that may ultimately fracture the cohesion that formerly was a characteristic of inter Eurozone national relations. He indicated that the policy makers in Europe see the problem as a fiscal crisis caused by spending profligacy and failure to keep firm fiscal balance. The wealthy, stolid Germans who abhor inflation above all, mostly blame the "fringe nations" of the zone such as Spain, Portugal, Greece and Ireland. They argue that their spending habits, and taxing timidity has resulted in burdensome national deficits and rising interest on debt...making further borrowing almost impossible. But Soros insists the policy makers are misapprehending the problem. According him, this crisis was caused not by the Europeans, but by a failure of the American banking system and the collapse of the housing bubble in the USA.
The way this author sees it, the problem seems analogous to the situation in the 1930s when most western nations were enmeshed by the gold standard. When the economy tanked, a government response was needed, but with gold backing their currency there were few options. At the present time, the problem lies with the euro. The global crisis has exposed the divergent levels of competitiveness within the EU, and the inability of the less competitive states to control the value of the European common currency-the euro. The compact among the 25 EU members obliges them to balance their budgets and reduce indebtedness, but this is the wrong time for that solution. Shrinking government expenditures to deal with debt just shrinks the economy. The problem now for the Euro zone is low demand, scarce jobs, and decreasing cash in circulation. A growing economy is needed. George Soros states succinctly:"You can GROW out of excessive debt, but you cannot not SHRINK out of excessive debt". Thus with the reduced demand for goods and services as characterized by the present economy..the prescription of austerity and forced debt-reduction is only making the problem worse..deepening the recession, expanding joblessness and shrinking the economies of the 25 member nations. But since fiscal stimulus was ruled out--he said--monetary policy remained the only tool available.
Today as I write this, I learned that Suffolk County has for the first time in its history, laid off 450 full time workers at one time. Later in the day, I passed in front of my favorite fresh fish store in lower Port, it was closed. Its front windows pasted up with big red "For Sale" signs. A little further down the East Main a favorite watering hole, "Lenny's" cafe and pub has closed its doors. The people here in the USA are struggling as the economy sputters rising and settling by fits and bursts. But our government's response HS been confused and ineffective.
Soros' warning and prescription for the EU is directly related to the present situation with the US economy. Neither can WE shrink out of our indebtedness. We can only grow our way out. But the Republican Party's only plan is to cut spending on "entitlements" and cut taxes for the wealthy (they like to misrepresent these elites who stash funds overseas as "the job creators") and slash government spending and services for the rest of us. Some of their prescriptions are draconian. (See the much Republican-touted proposed Ryan budget which cuts government spending by trillions of dollars over the next decade. Those trillions of dollars will not be "saved" for private investment in the USA, since the private sector is not generating new jobs. Those dollars are sucked directly out of the US economy, at a time when private sector growth is weak and demand is low. The result is, layoffs, business failures, closed stores which are snuffing out job-growth and staunching economic stimulus just at a time when we need it most. Nelson the fishmonger in lower Port is now out of work, he is not putting any new funds into circulation. Those 450 now-unemployed Suffolk County workers will not add to our local economy. They will not buy a new car, a TV, or contract for services from our local small businesses. In these circumstances government must act to prime the pump when the private sector can not. Government must help us grow out of our nation's excessive debt...with appropriate lending and spending (as now, when interest rates are near zero).
This idea that we must grow out of excessive debt, is not new knowledge. Economists have used the past to study the causes and effects of the Great Depression for the last seven decades. Soros as well as most Republican economists know quite well what should be done. So why do the Republicans in Washington persist in pursuing a policy of slash and burn on spending, emphasizing a frugality they never had or espoused when G. W. Bush was spending profligately (on unnecessary, unwise and unfunded wars of choice) as he grew our debt and deficit? These Republicans surely know (cutting spending and lowering taxes on the corporatists) will not improve our economic situation.
Could it be that they really do not want the economy to improve? Perhaps this policy suits their perverse political goal of unseating President Obama at all costs. An alternate insidious strategy may may be that they see the economic situation as a useful means to advance their long-term goal of dismantling the meager social security safety-net we have in this country. Having taken to heart Rham Emanuel's utterly pragmatic (nay Nicolo Machiavellian) quote: "Never let a good crisis go to waste." They are acting on it to use the present crisis as an excuse to dismantle the vestiges of the old FDR, Fair Deal and New Deal they so hate.
Or are they continuing to pursue the policy of late Republican strategist Lee Atwater's infamous "southern strategy" where-in during election campaigns the Republicans substituted innocent sounding "code words" for other actual malicious concepts. According to Atwater (loosely quoted here) : "You can't use the "n" word no more ( in the south) because it hurts you politically. So now you have to use words and terms that get the same emotional response like 'cuts to food-stamp spending', and 'decrease to medicaid' and other threats to similar social welfare spending because your southern electorate knows it hurts the blacks more than the whites."). So could it be that these recent Republican "talking points": "cut spending, "decrease government size", "cut the deficit", "cut entitlements" are simply the new code-words for the old "n" word. Thus, the Republicans who are after-all a political party which serves the interests only of a very small but powerful and wealthy minority in this nation have had to misrepresent themselves to Americans who have little to gain from the actual agenda of the Republicans. To this end, they have used the same old methods of division, bigotry, misrepresentation and untruths they have used for the last many decades to garner from the mass of the American electorate an electoral majority. The sad truth and a tribute to their duplicity is that they have been so successful over the years in duping the American people.
Get the picture?
rjk
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