Idiot finance gurus at G20

They’ll never learn….  Saw this on CNN and it torqued me off.

“A strong consensus both for recovery and reform” emerged from the G20 meeting of financial leaders that ended Saturday near London, U.S. Treasury Secretary Timothy Geithner said.

“This is a global crisis, and it requires a coordinated, global response,” he said at a news conference. “We have a broad base of consensus to act aggressively to restore growth.”

Recommendations from the G20 financiers will be pass on to the G20 Summit next month in London. They include a substantial increase in support for the International Monetary Fund and an expansion of the IMF’s membership, Geithner said.

Idiots.  There was also a “broad base of consensus” for the policies they had in place which caused the whole freaking problem!  The main problem is that they are all trying to “stimulate” the economy, and that will not work long term.  We need to be doing the exact opposite – paying down debt and letting bad companies go broke.

What we really need are policies which encourage saving and not those which encourage more debt – but that’s foreign to their way of thinking because they use broken down economic theories as a model on which to base their decisions.  Keynesian economics doesn’t work.  It’s never worked.  And it won’t work now.  All Keynesian policies do is mask the underlying problem which is too much debt and not enough savings and investment.

You cannot invest (in anything) if you don’t have savings.  Savings are fuel for the economy.  I wrote a long post about this a while back, and maybe I’ll take the time to make it more concise sometime, but the point is the same – you can’t actually save anything without producing more than you consume.  Ever.



One Response

  1. There are some goods news about the G20 however – many european leaders are reluctant to increase spending anymore, because they are already running with deficits (and the euro zone officially has a -3% deficit rule), secondly quite a few countries have experienced massive deficits, or know what they can lead to. So for 2009 there will be some major spending here in Europe as well, but after that I think that there may be some countries considering going “fiscally conservative”, especially with the onslaught of inflation. Swedish minister of finance already talks about the necessity of a fiscally responsible policy, germany has refused to spend more on “stimulation”, the UK will be going broke and inflated, and Ireland + Spain may be headed towards bankrupcy. Many countries are busy trying to help Eastern Europe (Sweden borrowed a pretty small amount of 10 million euros to Latvia – but for a population of 9 million Swedes that amounts to some money), and cannot spend too much themselves because of that. Italys stimulus package amounts to a measly 0.1% of GDP (although that is of course 0.1% too much) because they are already heavily indebted.

    In short, I think there are counter-forces on the move, currently not that strong but inflation and failure to revive the economy is going to strengthen them significantly. When the inflationary numbers in Sweden for February came out and was a few decimals above expectations, a few economists revised their guesses for the coming interest rate policy from a reduction towards 0%, to a reduction towards 0.5%.

    Keep posting, I like your stuff. Also, thanks to you I now read Bill Bonner frequently.

    // hpx

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