Britain Follows Germany in Departing from Keynesian Economics – U.S. Looks Socialist in Comparison
New York Times writer Paul Krugman is probably beside himself with grief as countries around the world are finally starting to get the message that spending your way to riches is simply not working. Kenseyian economics is crap. To the average person it makes no sense. But governments love to spend and they embraced the debt and deficit model as gospel. Krugman lead the choir here in the U.S. The guy actually thinks we didn’t spend enough. And I can hear his argument now, that the recovery failed because we didn’t spend enough.
Anyway, Germany told Obama they wouldn’t be spending any more after he asked the G20 to amp up the spending. Britain is the latest country that has decided to reign in the public spending. Gateway Pundit via the Wall Street Journal reports:
George Osborne presented the U.K. government’s emergency budget yesterday, with spending cuts and consumption-tax hikes intended to shrink public borrowing to 1.1% of GDP by 2016, down from 10.1% of GDP this year. Nearly 80% of that retrenchment comes as spending cuts rather than tax increases. The Chancellor of the Exchequer’s cuts are, on balance, good news for the British economy. Even more welcome, though, is that Mr. Osborne’s budget is the latest to depart from the short-lived Keynesian consensus that government can spend its way back to prosperity.
I hope this is the return to fiscal conservatism. Unfortunately the liberal, free spending government of the U.S. clearly do not share the same view. But after November I think maybe it will.
In related news, George Soros thinks that Germany will cause the Euro to collapse because of their budget saving policy. Think maybe he has something to gain if European governments spend more? I don’t know but the fact that the governments are no longer spending themselves into oblivion has to be counter-active to whatever agenda he has. The liberal progressive is well known for his meddling in world governments and economies.
CNBC also reports that Europe Austerity Makes America Look Socialist:
As the world’s 20 most powerful politicians prepare to jet out for talks in Toronto, the debate over whether to turn off the taps on stimulus spending continues to rage.
In the red corner (or should that be the left corner?), America and the Obama administration, claiming the stimulus cash they threw at the economy since the last G20 meeting in London is the key reason for falling unemployment and the relative health of the US economy.
In the blue corner, Europe. German chancellor Angela Merkel, French president Nicolas Sarkozy and British Prime Minister David Cameron claim only austerity can save us from a bond market – induced crisis in the wake of the Greek debt crisis.
“We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth. Without growth now, deficits will rise further and undermine future growth,” Larry Summers and Tim Geithner said in an open letter to the Wall Street Journal Wednesday.
On the other side of the pond, UK Chancellor George Osborne said that his emergency budget, that took the knife to welfare spending, will rebuild the economy.
“Our policy is to raise the ruins of an economy built on debt a new, balanced economy where we save, invest and export,” Osborne said.
2008 showed the potency of government policy but that is now changing, Charles MacKinnon, chief investment officer at Thurleigh Investment Managers, told CNBC.
“2010 is the year when we discover the limits of government power,” MacKinnon said. “The sovereign debt crisis stemming from Greece shows that the markets no longer have a blind faith that governments have the tools or the wherewithal to solve economic problems.”
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