Stimulation wrong for economy

Published 12:34 pm Thursday, June 23, 2011

Letter to the Editor

John E. Gibson, Blooming Prairie

By 1973, Western Europe had recovered from WWII, employing more modern machinery than that remaining in American factories. Japan had progressed from being a copycat to modern managerial excellence providing a model for other Asian nations. The world no longer needed our productivity except in agriculture and niche markets.

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We reacted by resorting to economic stimulus, creating the savings and loan crisis, the housing bubble, our current recession and by financing foreign adventures on credit. The huge indebtedness resulting from our failure to accept our reduced importance in the world can be repaid by inflation, by growing the economy increasing the tax base or by imposing austerity measures. Our politicians, afraid of the financial and political repercussions of inflation and austerity, are left quibbling about which party can best grow our economy. Further stimulation will only increase the debt in this post Keynesian world. A modest rate of inflation may be helpful in easing the pain but much of the indebtedness has builtin protection against inflation. Austerity is inevitable.

Republican policies are designed not only to protect the well-connected from sharing in the pain but to allow them to pick the economy clean, leaving John and Jane Doe to sweat the debt working amidst the environmental devastation left behind by unregulated businesses. If John and Jane Doe don’t come to their senses they will be reading a sequel to “Blinded by the Right,” called “Drowned in the Tea.”