Ken Nelson

Steve Keen’s Debtwatch predicted the global meltdown 4 years ago.  Here is what he says about where we would be now:

The economy will therefore falter–and only regular government stimuli will revive it.

This however will be a Zombie Capitalism: the private sector’s reductions in debt will counter the public sector’s attempts to stimulate the economy via debt-financed spending. Growth, if it occurs, will not be sufficiently high to prevent growing unemployment, and growth is likely to evaporate as soon as stimulus packages are removed.

The only sensible course is to reduce the debt levels. As Michael Hudson argues, a simple dynamic is now being played out: debts that cannot be repaid, won’t be repaid. The only thing we have to do is work out how that should occur.

He wrote this in Dec 2005 and it  predicts quite well where we are today. Government prints money, people and businesses get more afraid and cut back, laying off people, who cut back, and the cycle continues…

What breaks the cycle?  Nothing in the current approach does. ONLY reducing the debt – and thus the debt service – results in the ability to grow again.

Bush and company had the right idea, sort of, when they funded the banks, but that was crisis intervention meant to avoid total meltdown.  What can they do to make us whole when $50 trillion disappears overnight?  Nothing.

So we have to reduce our debt. This will come from paying it down, through inflation, and to make it faster – outright debt waiving (and nationalization of the resulting failed banks).

As a trade for the pain of cutting this debt away, we should also ensure that the government can’t/doesn’t sponsor private debt any longer.  Their intervention made debt based speculation much larger than it would have been had investors been playing with their own money.

Right now the same crew that bought votes with easy credit is in charge and hawking the same line.  No wonder people are withdrawing.