EconomicCrisis.US

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.

To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending—the classic Keynesian move, the same old prescription since donkey’s ears.
Read the rest of this entry »

Question: Looking into the future of the American economy, I see tons of debt, the yoke of increasing social spending, pork-fed bureaucratic waste, the exporting of jobs and the importing of poverty. While this may paint a negative picture, I feel it’s reality. We all want to be patriotic, but aren’t there more fiscally responsible places to invest in that may offer a better landscape? –Dave, Bethlehem, Penn.

Answer: When I was a teenager back in ’60s, a gravelly voiced folk singer named Barry McGuire hit the top of the popular music charts with a tune called “Eve of Destruction.” The song was basically a recitation of all the problems plaguing the U.S. and the world — racial strife, violence in the Mideast, the threat of nuclear Armageddon — with the end of each verse suggesting, per the title, that we’re on the eve of destruction.
Read the rest of this entry »

Bigger, as the Federal Reserve may soon discover, is not always better.

The prospect of a renewed effort by the U.S. central bank to drive down already super-low borrowing costs raises the issue of whether such measures can help stimulate a recovery that is faltering due to a lack of consumer demand.

The sorry state of the U.S. economy, despite all the monetary and fiscal firepower the Fed and the Treasury have deployed, already befuddles the experts. Worries about a double-dip recession are rampant, and were the topic du jour at the Fed’s annual Jackson Hole conference.
Read the rest of this entry »

There are three main views of the financial crisis and the most recent recession. In the first two views, the debate over the fiscal deficit is quite separate from what happened in the crisis. But in the third view, the financial crisis and likelihood of fiscal austerity are closely linked.

The first is that something went wrong with the financial plumbing central to the world’s economy. Failed plumbing is a serious business, of course — great real estate can be ruined by a burst pipe. But it’s a technical issue; nothing deeper is at stake.
Read the rest of this entry »