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Economic Fix-A-Flat

It seems like government efforts worldwide over the past few years to re-inflate the economy are nothing more than the economic version of fix-a-flat. Sure, putting some fix-a-flat in your leaking tire might get you down the road, but eventually you’ll need to either patch or replace that bad tire.

Governments, instead of fixing the underlying problems of unsustainable personal and governmental debt levels, have chosen to pump up a flat economy with stimulus, quantitative easing and all manner of money printing – to no avail. Worse still, few inside government – and only a few outside of it – acknowledge or understand that our current debt-based monetary system requires an ever expanding expansion of credit (consumer and government debt) in order to ultimately avoid collapse.

On their face, arguments for economic stimulus, quantitative easing, zero interest rate policy (ZIRP) are absurd. No matter what fancy economic models and terminology are wrapped around the above policies they are nothing more than arguments for resolving a debt crisis by taking on more debt. Those who argue for more quantitative easing are arguing that somehow governments are somehow more than the some of their parts – the underlying economy and all of the individual actors within it. This is a nonsensical argument. Eventually, debts must be paid. Who pays them? Taxpayers. The farce of government buying its own debt so that interest rates stay low, so people can borrow and spend more is a perpetual motion fantasy.

The old economic order is beginning to crack. Governments around the world are beginning to fall. Unfortunately, their replacements appear to be shills for the old economic order. The scheme continues. However, protests around the world, including Occupy Wall Street, reveal the deep dissatisfaction that many have with an economic system and political system so intertwined and unresponsive to the desires of the public that the people are withdrawing their consent. How long this situation can continue and what the ultimate resolution will be are not yet known.

What is apparent is that economic fix-a-flat isn’t working. Some kind of reform will be necessary. Whether that reform is a patch or a new tire remains to be seen. Europe will either move toward tighter political integration or it will come apart. There is continuing talk that central banks and other institutions may push for a return to some type of gold backing for currency along with some kind global currency. If the current crisis is any indication, a global currency will not be kind to the economies of many nations. Speaking of nations, their status is uncertain too. Will we continue to speak of nation-states or will the trend toward gloabal governance continue? We stand astride two eras. These are interesting and potentially dangerous times to live in.

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