by Guest Author Marshall Auerback, New Economic Perspectives
by Rick Davis
(In a number of recent articles we have explored potential "unthinkable" solutions to both the U.S. sovereign debt problem and the fiscal consequences of a suddenly balanced U.S. Federal budget -- given that a balanced budget would suck about 14% out of the country's GDP, meeting the clinical definition of a depression. These articles are listed at the end of this one under Related Articles)
As we consider the "unthinkable" paths out of our current economic mess, some are clearly more nightmarish than others. Full fledged episodes of either deflationary depression or runaway hyper-inflation certainly fall into that category. A couple of decades of anemic and stagnating growth while "kicking the can down the road" (e.g., Japan since 1990) probably also qualifies as a nightmare -- at least for those currently not enjoying life near the top of the food chain. But there are other possible nightmares, particularly if governments conclude that past interventions in the economy failed merely because they were not intrusive enough.
by Dirk Ehnts
Søren Kierkegaard’s 1849 classic The Sickness unto Death provides us with some thoughts about debt and sin. Let me present a quote from the Penguin Great Ideas edition of the book (p.131):
Also the law for the growth of this continuity differs from that of a debt or a negation. A debt does not grow by not being paid back, it grows every time it is increased. But sin grows every moment one fails to get out of it. Far from being correct in thinking that only new sin increases the sin, it is his being in a state of sin that, in Christian terms, puts the sinner in the greater sin, it is the new sin. We even have a proverb which says that to err is human while to remain in error is of the devil.
The debt limit crisis is upon us. Treasury Secretary Geithner says the U.S. Government will not be able to meet all its obligations on August 3, unless the debt ceiling is increased by Congress. The Secretary says he is out of moves to extend this date. I don’t think that’s true. I think he can use proof platinum coin seigniorage to supply all the money needed to spend Congressional Appropriations. I do not know if the Administration knows about this idea yet. It may, and it may simply have been unwilling to mention it for its own reasons. But just in case it doesn’t know, and also for the sake of the rest of us, I’m making another attempt to state the case for using coin seigniorage, so that as many people as possible know that the President has an alternative to the “shock doctrine,” make a deal approach to cutting essential spending and services including the social safety net, in return for getting $2.6 Trillion more in debt issuance authority.
by Dirk Ehnts
By accident, I found an old article I wanted to comment on and then forgot. Wolfgang Kladen, former chief editor of economics at the SPIEGEL and chief editor of the Manager Magazin in the 1990s, wrote on December 20th 2010 on the euro. Here is the appetizer (those lines on top that should make you want to read more):
Deutschland ergeht sich in Euro-Pessimismus, Untergangspropheten warnen vor dem Zusammenbruch der gesamten EU. Ist die Lage wirklich so dramatisch? Keineswegs – unser Geld steht mindestens so gut da wie der Dollar: Der Wechselkurs ist stabil, die Inflation gering.