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Tuesday, May 8, 2012

The Big Question

The big question facing Europe and the US is this:

How do you simultaneously boost an economy and slow a deficit?

The Stupid Answer: Business friendly Pro-growth policies along with fiscal restraint.

Why is this so stupid?

Because "pro-growth policies" means "negative real rates to encourage lending" along with printed money to support the stressed banking system"  and fiscal restraint means "stop printing money and let rates become market-determined to discourage reckless lending."

In other words  pro-growth really mean "Print Money" and fiscal restraint means "Stop printing money."

How you do both simultaneously is a real trick.

O yeah, of course there's other stuff like absurd bankrupt entitlements programs and destructive labor laws the are a real drag on an economy.  But reforming them means necessarily temporarily slowing growth.   This could turn a recession into a depression.

What's a global economy to do?

In case you think I'm the only one who thinks this watch:

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