While the political leaders of 20 countries around the globe met in London ostensibly to “save” the global economy, demonstrators outside chanted for the world to “abolish money.” Given the direction that these “leaders” have decided to follow – by throwing another trillion dollars into that financial black hole known as the International Monetary Fund – it won’t be long before governments everywhere have destroyed money to the point where it might as well be abolished.
One way to gauge the success of a political gathering such as the G-20 is to read the comments from the politicians – and the economists. If they claim “success,” then one can be assured that the results were an utter failure, and the latest meeting in London does not disappoint in that department. First, President Barack Obama declared that this meeting was “a turning point in our pursuit of global economic recovery.”
But the real harbinger of doom came from economist Jeffrey Sachs, who wrote in the Huffington Post:
The results were beyond what most, including myself, expected. IMF resources were raised significantly, to provide a liquidity cushion for global trade and production. The World Bank and regional development banks (such as the African Development Bank) were encouraged to boost lending, backed by commitments of the G-20 to raise the capital base of these multilateral banks. Taken together, the combination of new credit lines of all sorts – in effect, new liquidity — is on the order of $1.1 trillion.
He added: “Serious progress was also made on a framework of tighter global financial regulations, including controls on executive compensation, crackdowns on tax havens, controls over hedge funds, and much-needed regulation of the ‘shadow banking system….”
Keep in mind that Sachs believes these developments to be a good thing. Somehow, he is telling us, if government can just print enough money, raise taxes, and establish enough control over the economic choices of individuals, that the result will be a global economic recovery.
One would like to ignore all of these statements and hope that the people who made them either are not serious or are not influential but, alas, that is not the case here. It seems that the consensus among those holding political power as well as among professional mainstream economists is that the real problem is a “lack of aggregate demand.” Thus they continue to throw gasoline on the flames in the mistaken belief that they are putting out a fire.
Not surprisingly, those in power lay the blame directly at the feet of private enterprise. “It’s hard to deny that some of the contagion did start on Wall Street,” Obama said, asserting that some firms took “wild and unjustified risks” and some government regulators were “asleep at the switch.”
Indeed, the President is partially correct, but this did not “start” on Wall Street. This crisis began in Washington, D.C., when the Federal Reserve held down interest rates to try to mitigate the recessionary fallout from the burst stock-market bubble it had created previously. This helped bring on the housing bubble.
For all of the blame that governments are giving to private enterprise for creating the current crisis, it is easy to forget that this basically is a monetary failure – and governments have the monopolies on creating money. It is not a failure of government to collect taxes, nor is it even a failure of regulation. It is a failure of public policy, and an utter repudiation of the notion that governments can manipulate money, tax, borrow, and spend economies into prosperity.
None of the G-20 governments can “create” prosperous economies. However, they can wreck them, and it seems so far that their efforts are taking everyone down a path that becomes darker and more uncertain. Unfortunately, government officials and the “experts” such as Sachs are as blind as the journalists and the protesters who descended on London.
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