The Financial Crisis: Why Current Actions Won’t Work

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I put a couple of articles on the back-burner, waiting for a chance to read both before commenting on them.  As it happens, this most recent article reminded me a little of this one so I thought it was time to explore them a little further.

Ultimately, the conclusion that both seem to have is that we’re going to run out of taxpayers.  And the problem with the financial crisis is that it’s nuclear:  we might be able to bail out a few banks now, but we’ll have toxic debt issues related to the bailouts for generations to come.

The solutions offered were mixed.  The Reality Sandwich article is really only in ‘Part I’ of a series, but towards the end, they seem to speak fondly of nationalization of the money creation process.  This would marginalize the demands placed on all capitalist countries by the financial community to borrow as they print money.  Instead, they would simply print money.  As someone who warns against the ills of abusing those things that come for free, this solution might create more ill than good.  It’s called inflation.

However, inflation only comes when people expect more from their economies.  Perhaps if we tuned ourselves to think in terms of zero growth (zero growth of money supply (unless under economic ‘duress’), zero growth of economies, zero growth of wages, etc), it might actually be feasible.

Good luck with that, though.

Enter the Socialist Project, with another lengthy and more current article, focusing mainly on the use of Keynesian philosophy and who’s doing it better.  They argue that China and other countries are better positioned to jump-start their economic bodies because they have a healthier attitude towards Keynesianism, but again, I’m concerned that we’ve really missed the point: we no longer have the luxury of infinite growth .

All of these policies, be they monetarist or Keynesian or whatever, simply don’t account for the notion that it’s irresponsible to fashion economies around the principles of endless consumption.  At some point, the party has to end.  We’ve already talked about the impact that demographics will have on our current situation , but the truth is that we don’t think anyone is listening.  There are too many special interests at risk (big banks, big unions, big government, etc etc etc).

What are your thoughts on this situation?  What do you think our governments should do to pull us away from financial ruin while trying to also encourage people to have a positive attitude about their futures?  Post your thoughts below.

2 comments on “The Financial Crisis: Why Current Actions Won’t Work

  1. I don't understand your argument E.D. Who is proposing “infinite growth”? And who said China has a “healthier attitude towards Keynesianism”?? The whole point of the Harvey article is that China has the economic conditions (like no debt) and an ideological advantage (like not being stymied by silly labels) to implement Keynesian economic policies and possibly surpass the current global economic hegemon.

    As for your combining of the “big three” – who literally gave billions of dollars to the big banks? And who gave billions of dollars to the “big unions”. I must have missed that one! The current stage is described as “neoliberal” where so-called left (Obama Democrats) and right (Harper Conservatives) governments both are giving our taxpayer money to their friends in the finance sector – in the billions of dollars, and a few million to their friends in manufacturing. If there ever was a need to nationalize – it is now. The problem with nationalizing has always been are we going to take them over or buy them This crisis shows that we can buy them for a very small price and utilize all the economic forces for the benefit of all workers.

    Power to the people.

  2. Hi Power to the People:

    Love your handle. Yes, you've stated a little more clearly what I tried to describe with China's situation. I suppose they have the capacity and capability to just do what should be done. They also have all of the money that we've spent on crap in dollar stores and mega-marts that we should have been saving and keeping to ourselves with more modest lifestyles.

    When you ask who was questioning 'infinite growth' and who mentioned the term, I'll confess that it's me, and I apologize for not giving my comment more context, so here goes. Most of the economic 'solutions' being offered by our talented economists and policy makers involve some level of continuous growth in order to elevate the tax base, ensure increases in government revenue, ensure that we have a constantly improving ROI for businesses, etc. In fact, the entire capitalist system is deeply rooted in the notion that we must grow forever. The 'R' word strikes horror into the hearts of everyone. What's going to happen when the 'D' word becomes the norm?

    Many groups and organizations, particularly those that are tied in with environmental movements are questioning this logic, as am I, because we don't have infinite resources, nor do we have infinite capital or paper to print our money on, regardless of who owns the banks or other means of production.

    I hope that makes a little more sense.

    What I don't understand is your reference to the 'big three'. Which 'big three' are you talking about? I didn't discuss them above (although if you're talking about the big 3 auto companiees, I have in the past), so I need a little more context to your thoughts.

    I've always maintained (albeit a little sheepishly, I suppose) that I don't see a lot of benefit in bailing out the banks or any company that whines for a little taxpayer cash. Nationalization might be a good idea, but we've still got the nuclear debt issues to manage and it raises questions as to who should really pay for that. Socializing just does two things: it promotes bad business practice and it makes innocent taxpayers pay for someone else's bad management (intentional or otherwise).

    Of course, as someone who studied a little economics in the past, I do know there's one adage we shouldn't ignore: buy low and sell high, so I agree with your thoughts that now's the time if we're going to do this. The only problem: Canada's banks are relatively healthy and I see no need to spend our money on stable institutions. But the US … another question altogether!

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