Tuesday, May 15, 2012

EconomicCrisis.US

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‘Analytics’ Category

Economists and politicians bewitched by the self-righteous allure of budget “austerity” are ignoring history, imperiling the fragile recovery in the U.S. and suffocating , Nobel prize-winning economist Paul Krugman writes in his new book, “End This Depression Now!”

“In the Great Depression leaders had an excuse: nobody really understood what was happening or how to fix it,” Krugman writes in this rallying cry for government-backed stimulus. “Today’s leaders don’t have that excuse. We have both the knowledge and the tools to end this suffering.”
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We will be hearing a lot about debt between now and the U.S. presidential election. What will likely be absent in the debate, however, is any consideration of the relationship of debt to the requirement for perpetual economic growth and its role in the dramatic increase in economic inequality in the and the rest of the world. If debts go unpaid, we face economic crises. But when debts are paid, money flows from the less rich (the “99 percent”) to the more rich. Debt, as presently constituted, is a and a trickle-up economy. How did we get into this dilemma?
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Since around 1870 the United States has had the largest economy in the world. In security matters, however, particularly in Europe, the US still played a limited role until the Second World War. In 1945, at the end of the war, the United States was clearly the strongest power the world had ever seen. It produced almost as much as the rest of the world put together. Its military lead was significant; its “soft power” even more dominant.

After the Second World War the American share of world production rapidly declined to 40 percent in 1950, 30 percent in 1960, and 25 percent in 1975. Soon predictions were made, not only by the Soviet leaders, that the would come to surpass the United States. The problems of the 1970s — Vietnam, Watergate, and the partial collapse of the Bretton Woods-system — indicated that the United States was in decline. In the 1980s predictions were made again; this time that Japan would come to surpass . And, despite the 1990s being a very strong decade for the US, the many successes of the European Union soon made many observers predict that the future belonged to the EU.
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We live in a world that is becoming increasingly unstable, and the potential for an event that could cause “sudden change” to the U.S. economy is greater than ever.

There are dozens of potentially massive threats that could easily push the U.S. economy over the edge during the next 12 months. A war in the Middle East, a financial collapse in , a major derivatives crisis or a horrific natural disaster could all change our economic situation very rapidly. Most of the time I write about the long-term economic trends that are slowly but surely ripping the U.S. economy to pieces, but the truth is that just a single really bad “black swan event” over the next 12 months could accelerate our economic problems dramatically.
If oil was cut off from the Middle East or a really bad natural disaster suddenly destroyed a major U.S. city, the U.S. economy would be thrown into a state of chaos. Considering how bad the U.S. economy is currently performing, it would be easy to see how a major “shock to the system” could push us into the “next Great Depression” very easily. Let us hope that none of these things actually happen over the next 12 months, but let us also understand that we live in a world that has become extremely chaotic and extremely unstable.
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