Tuesday, February 10, 2009

Eric Margolis on the Obama Stimulus

Obama and his team of Democratic Keynesian economists hope to spend the US out of deep recession by dishing out US $2.2 trillion in freshly printed money.

The famed 1930’s economist Lord Keynes claimed governments could correct recessions by massive deficit spending which would be repaid when boom times returned. His theories have become a state religion for liberals on the left of the Democratic Party.

But massive deficit spending is like treating a poison victim with more big doses of poison. This kind of economic voodoo reminds me of medieval medicine: try every kind of dangerous procedure until you either kill the patient or he somehow survives the doctors.

The current crisis was caused by runaway borrowing by the Bush administration, individuals, hedge funds, and the unregulated "shadow" financial industry in New York and London. Obama’s remedy: borrow and spend trillions more.

Europeans are gravely concerned that Obama’s planned spending orgy will eventually ignite worldwide inflation, undermine the US dollar, and raise US interest rates. Since the US runs on borrowed money, any decline in the value of its currency will require higher interest rates to be paid to foreign investors to make up for their added risk.

read the entire essay

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