(a fatal case of hubris) 8/17/13

In the 1960s and 1970s, liberal economists believed they could eliminate all poverty. In 1980s conservative thought tax policy could permanently raise the savings rate. Now the world is being flooded with money and debt. Keynesians demand massive new government spending insisting that with the economy having so much excess capacity, debt doesn’t matter. Many conservatives demand fiscal austerity, believing the announcement of which will somehow attract global capital. All of this hubris surrounding quantitative easing (OE). The hope is that affluent stock owners will increase consumption, creating a trickle down monetary effect to the rest of the economy. Seldom mentioned is that central bankers have a terrible track record at identifying and controlling financial bubbles, including stock market bubbles.
Each January, the FOMC has predicted annual growth of roughly 3.5%. The outcomes were always closer to 2%. How could the experts be so wrong? Over the last five years, after fiscal and monetary stimulus, global public and private debt increased by a stunning $48 trillion (global GDP is $85 trillion). Stock market capitalization jumped by an astounding $26 trillion. Yet the world economy is actually slowing.
How do we survive global capital system with ever expanding oceans of money and seemingly few rules of the road?

Source—seekly standard, david smith


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