The Dutch government falls, France is in flux, Spain, Italy, Portugal, Greece, Japan and the UK fall back into recession. Fallout from austerity measures are prompting new concerns about the weight on eurozone economies.
Good discussion with Desmond Lachman, resident fellow, American Enterprise Institute, Simon Johnson, professor of entrepreneurship at MIT’s Sloan School of Management, a senior fellow of the Peterson Institute for International Economics and author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You” and David Smick global macroeconomic advisor, founder and editor of The International Economy magazine and author of “The World Is Curved: Hidden Dangers to the Global Economy”. Here is the audio link.
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This backlash over austerity is precisely why it might be prudent to consider some exposure to gold related or other investments that provide a measure of inflation protection. When there is extreme resistance to increasing taxes and to cutting expenditures, then “printing money” (taxation by stealth) is often the course of least resistance for politicians; at least that is what history suggests. The only question may be the timing and magnitude.
However, as Ms. Park has often suggested, the widespread deleveraging, defaults, and austerity related contractions appear to be more than offsetting the various quantitative easings and other monetary interventions so far. But the political unrest in Europe hints at the potential for that to change. It warrants watching very closely. I am also reminded of the old adage: it is better to prepare early for a crisis than too late.
We tried the other route (big stimulus) here in the US and the results have not been spectacular. I can’t tell if was the right thing to do or not. Probably the best thing is to let all the debt collapse, go into a deep depression, eliminate all the weakness, and come out stronger and hopefully a lot smarter. Isn’t that closer to what Iceland did? Looks like the US is heading down the Japan road and that isn’t good.