Liam Halligan has written a not unreasonable article called We should have listened to Zhu Min years ago – don’t ignore him now:
The “twin pillars” of the world economy continue to totter. Global investors, politicians and the financially-literate general public are wringing their hands about two previously “unthinkable” disasters – the US Congress “closing down” the government of the world’s largest economy and the break-up of the eurozone.
American lawmakers may do a deal this weekend, so managing to raise the US debt-ceiling prior to the August 2 deadline. Europe’s monetary union may, for now, be held together with a bucket-load of political fudge. If so, we would avoid both a US default and a “euroquake”, so averting another “Lehman moment”. I certainly hope we do.
[…]
“It’s no use throwing dollars out of a helicopter,” Guido Mantegna, the Brazilian finance minister, has commented.
“QE amounts to economic hooliganism,” the Russian prime minister, Vladimir Putin, observed last week.
Mantegna and Putin are right. We Westerners won’t admit it.
‘We’ westerners? To hijack an old joke about the Lone Ranger and Tonto, Who is “we”, Pale Face? What he is saying is just what Austrian school economist have been pointing out for years.
But he is wrong about sovereign default being a ‘disaster’. On the contrary…the sooner the better, I say. The only cure for the absurdity of bloated state borrowing is for it to become a great deal harder for states to do it… and as there is clearly no political will to tell all the vested interest with their snouts in the trough that the binge is over, not just for the well connected bankers but for the ‘innocent’ voters who are state funded parasites, then the only solution is for lenders to learn that sovereign risk is now actually… risky.
Let even one of the Big National Players default and the money states borrow will dry up like morning dew… and that is a good thing, not a bad thing.
The purpose of taxation is to provide revenues for the functions of governments.
The function of sovereign borrowing is . . . ?
The destruction of the Eurozone and the default of the US economy are to be welcomed. It will be painful. It will be dislocating. But it will be, in the long run, healthy. Wishful thinking is poisonous.
Communism put paid to tens of millions of lives because it was a fantasy too attractive t pass up. The current bind in which we are tangled is an artefact of our apparent inability as a species to accurately assess the realities with which economics confront us. Is there any way in which the human race can be convinced of the fact that TANSTAAFL? We must, must MUST at the very least halve the level of taxation that is mulcted from the productive populace and squirted all over the leeches.
There’s times when sovereign borrowing makes good sense. WW2, say. But just like it’s fine to take out a mortgage to buy a house, and not fine to take out a mortgage to buy groceries, there’s a bit of a difference between WW2 and a bunch of social programs.
Government must learn to spend less than it steals.
The function of borrowing, rather, is to provide funds for the function of governments.
the taxpayers (and their grandchildren) are guarantors.
The government borrowed to cover ongoing expenses and not investment in projects to deliver efficiency.
Witness the NHS*, which sees slowing in the rise in funding resulting in cuts to services. IF the “investment” spending was truly “investment”, then the reductions in funding should result in a slowing or ending of those investment programmes, but no effect on day to day operations.
* I almost wrote #NHS, such is the grip of Twitter
Heh, John Galt, I’ve never quite thought of it that way:-|
He’s just being greedy now! 😉
We’ve already given him QOTD for that one over on CCIZ.
Yes, it will have to be well and truly broken for these clowns to ever really contemplate fixing it. Otherwise the economy just gets patched up over and over again, like 1960’s Cuban Cadillacs.
He’s just being greedy now! 😉 We’ve already given him QOTD for that one over on CCIZ.
I’ve actually changed it a bit since the QOTD on Kitty Kounters. I’m also thinking about getting t-shirts printed.
Still stunned that no-one has said this before as it’s absolutely, bloody blindingly obvious. Hey Ho!
:O)
I am wary about being on the same side as the Economist magazine and the Financial Times newspaper – and they favour default.
However, no matter what their dark motives may be (and, no doubt, they have evil motives – they normally do) objective reality can not be denied.
And objective reality (for this) was recently summed up by Jim Rogers.
If (for example) the Greek government does everything it is being asked to do (by the IMF and E.U.)with one 100% competance and 100% honestly….
Then its national debt still gets WORSE every year.
In short the choice (for Greece and elsewhere) is between a default now and an even bigger default latter (for the world economy is not going to recover by some magic spell).
Of course default is not actually needed at all (and neither are bailouts) – what these governments should do is stop borrowing money.
In short – just spend the money they take in (not more than the revenue they take in) then no default (now or later) would happen.
However, this is considered “politically impossible” – so better a default now, than an even bigger default latter.