7 Aug
2011
Posted in: Blog
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Forget Great Recession, and Welcome Depression 2.0

Years of denying the laws of economics their final reckoning, while refusing to cut spending and tighten our belts, have brought us (and Europe) to the edge of another economic cliff.  Futures markets are pointing downwards after the S&P downgraded America’s debt, and European leader spent the weekend trying to prevent Italy from defaulting.

From MarketWatch:

U.S. stock futures were trading sharply lower in Asian trading hours on Monday after rating agency Standard & Poor’s lowered its rating on U.S. debt to AA+ from AAA late Friday. In addition, Europe is continuing to struggle to contain its sovereign debt woes and said over the weekend it will actively implement its bond-buying program in an effort to calm markets.

To quote President Obama’s erstwhile spiritual leader, “America’s chickens have come home to roost.”

The decisions facing America’s policymakers, the Administration and Congress included, is whether the monetary is to remain expansionary (e.g., implementing QE3, which seems at least somewhat likely) and whether fiscal policy is to remain in deficit mode, or to reverse course completing, admitting error after 2.5 years of misguided policies and partisan handouts.

One thing seems certain: President Obama’s re-election prospects have been damaged mightily by his administration’s economic ignorance.  For the president to once again pursue policies that perpetuate reckless spending seems unconscionable, and Republican’s should use this opportunity to sound the clarion call anew for fiscal sanity and significantly smaller government.

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