Financial Contagion and Other Ills

Governments on both sides of the Atlantic are making the same blind, stupid, ideological error: trying to rescue faltering economies with spending cuts. It doesn’t work, as John Maynard Keynes explained decades ago. Nobel laureate Joseph Stiglitz says the abandonment of proven, pro-stimulus Keynsian economic policy means continued high unemployment and revenue loss, which will cripple growth for years to come, ensuring the sustained misery of millions.

The stubbornness of the European Central Bank—which has confirmed itself as an agenda-driven political, rather than merely economic organization by opposing essential financial reforms—takes much of the blame. And Barack Obama’s failure to put Americans to work, demand tax increases, eliminate corporate tax giveaways and renew the payroll tax cut—which would put over $100 billion in the hands of ordinary Americans—etc., ensures more of the same in the United States. —ARK

Joseph Stiglitz at Project Syndicate:

The end of the stimulus itself is contractionary. And, with housing prices continuing to fall, GDP growth faltering, and unemployment remaining stubbornly high (one of six Americans who would like a full-time job still cannot get one), more stimulus, not austerity, is needed – for the sake of balancing the budget as well. The single most important driver of deficit growth is weak tax revenues, owing to poor economic performance; the single best remedy would be to put America back to work. The recent debt deal is a move in the wrong direction.

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