Of Helplessness And Paralysis

IBD Editorial ^ | June 27, 2011 | Of Helplessness And Paralysis

[Kaslin]

The Bank for International Settlements in Switzerland has just published its annual report, and it is a dour document.

The BIS was created in 1930 to handle post-World War I reparation payments from Germany to Britain and France. The Great Depression ended reparations, and now the BIS provides sober commentary on the global economy. Its latest report oozes foreboding:

• On government debt: "The market turbulence surrounding the fiscal crises in Greece, Ireland and Portugal would pale beside the devastation that would follow a loss of investor confidence in the sovereign debt of a major economy."

• On the need for higher interest rates: "Our attempts to cushion the blow from the last crisis must not sow the seeds of the next one."

• On inflation: "Inflation risks have been driven up by ... dwindling economic slack and increases in the prices of food, energy and other commodities."

By the BIS report, you'd hardly know that there are almost 45 million unemployed in the advanced countries, up 50% from 2007. But can governments do anything about it? The BIS has no answer. Economic policy seems paralyzed.

There's an almost palpable sense of helplessness, whether reading the BIS report or listening to Fed Chairman Ben Bernanke at his recent news conference. Economics seems to have emptied its toolbox. Patience and prayer are what's left: Last week's release of oil stocks was a desperate prayer for lower gasoline prices.

[screaminsunshine]

Man that headline is about how I feel about it all.

[Mariner]

"Economics seems to have emptied its toolbox."

Bullsh!t.

The Austrian school and plain common sense will tell you that it's necessary to allow the debt deflation to run its' course. No bailouts, no programs of any kind.

And especially no government guarantees.

Yes, the devastation would be enormous...probably another 25%5 contraction beyond the 25% REAL contraction we have already experienced.

But from those ashes green, healthy shoots will begin to appear within a year of bottom.

But, sound economics and politics are like oil and water. They can never come together under any normal circumstances.

Thus, the USA is on the hiway to hell. Bent on destruction.