The "Keynesian" prescription aside, the depth of appreciation for the problem posed by mounting debt stands in stark contrast to much American reporting on the subject. The whole country is starting to resemble Illinois. What a shock.
The article, "Don't Go Wobbly On Us Now, Ben Bernanke" by Ambrose Evans-Pritchard, originally appeared here, appended by vigorous and juicy comments, many of which recognize the need for governments to slash, not cut, spending, meaning, for starters, fat public sector union employees must take a haircut just like the rest of us.
Some excerpts follow:
Barack Obama's home state of Illinois is near the point of fiscal disintegration. "The state is in utter crisis," said Representative Suzie Bassi. "We are next to bankruptcy. We have a $13bn hole in a $28bn budget." ...
The Economic Policy Institute says states face a shortfall of $156bn in fiscal 2010. Most are banned by law from running deficits, so they must retrench. Washington has provided $68bn in federal aid, but that depletes the Obama stimulus package. ...
Bank loans in the US have fallen at a 14pc rate this year, caused in part by Basel III rules pushing banks to raise capital ratios.
The M3 money supply has fallen at a 5.6pc rate since September. The Fed's Monetary Multiplier dropped to an all-time low of 0.809 last week.
The contraction of eurozone bank credit to firms accelerated to 2.7pc in January, while M3 fell by a further €55bn. Japan's GDP deflator has dropped to a record low of -3pc.
These are epic warning signals, with echoes of 1931. ...
Don't go wobbly on us now, Ben. If the governments of America, Europe, and Japan are to retrench – as they must – their central banks must stay super-loose to cushion the blow.
Otherwise we will all sink into deflationary quicksand.
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