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Global Financial Capitalism: Not Working

The International Monetary Fund issued a warning that will no doubt send deflation hawk Paul Krugman into a #facepalm. The Washington Post reports [1]:

Europe could suffer a dangerous bout of deflation if regional officials, including those at the European Central Bank, do not move quickly to support the continent’s banks and the wider economy, the IMF  warned Wednesday. Using some of its most ominous language yet, the usually understated IMF called the euro zone “unsustainable in its current form.”

In testimony to Congress last month, Fed Chairman Bernard Bernanke explained [2] how the Eurozone crisis acts “as a drag on our exports” and weighs heavily on U.S. financial institutions. And this week Reuters reported [3] on National Association for Business Economics survey data that suggests “American companies are scaling back plans to hire workers and a rising share of firms feel the European debt crisis is taking a bite out of their sales.”

Meanwhile, at his Foreign Affairs blog, trade deficit watchdog Clyde Prestowitz writes [4] today:

The weaknesses of the whole global system are now becoming excruciatingly apparent. China has been urged by the G-20 and has committed to rebalancing and focusing on domestic consumption led growth. But consumption accounts for only 35 percent of China’s GDP and is not large enough to be an engine of growth in the short term.

Over here we’re conducting a farcical debate in which “rugged individualists” are apparently resettling the Wild West (with no damned federal government handing out land grants or confiscating property on behalf of railroad companies or subsidizing transoceanic cables, of course!).

Sure, guys, another round of tax cuts will fix this.

It’s at once pathetic and deeply frightening.

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#1 Comment By Johnny F. Ive On July 19, 2012 @ 6:40 pm

The road to the Republican belly is through the military industrial complex. If corporatism is the only way then perhaps threats of austerity along with promises of carrots if the defense department will wage war on our trade deficit. Alternative energy would be good carrots. American troops would make fine solar panel installers. They can use the threat of peak oil to scare the American public.

#2 Comment By tz On July 19, 2012 @ 7:10 pm

Is it just me, or does anyone else consider the use of the word ‘capitalism’ to describe intervention, corporate socialism, and other government if not supranational meddeling including picking winners (cronies) and losers (real entrepreneurs) as a gross lie, falsehood, evil?

I’d choose the wild west sans the government choo-choose.

#3 Comment By Scott Galupo On July 19, 2012 @ 9:26 pm


My general feeling is that, like Gandhi supposedly said of Western civilization, laissez-faire is a good idea. Never been tried.

#4 Comment By Robert_Burdette On July 20, 2012 @ 5:24 am

Speaking of resettling the West. I think we are in the late rounds of the long-running national battle between what Wallace Stegner called “boomers and stickers.”

My suspicion is that the boomers are about to suffer a debilitating knockout. Perhaps then the rest of us can get busy building an economy and society which will meet the needs of us lowly stickers.

#5 Comment By Robert Hoskins On July 20, 2012 @ 10:40 am

As a westerner, I’d recommend that all the “rugged individualists” stay where they are. We don’t need them, don’t want them, and anyway the water’s disappearing. And the federal subsidies are disappearing too. You actually need to understand reality to make a living here.