The US government and other governments stepped in with bailouts and supports that were, themselves, based on debt -- the governments had to borrow (mostly from the central banks of China and Japan) the many hundreds of billions that they then turned around and "lent' to various financial institutions as well as to automobile companies. However, it is highly unlikely that these foreign government banks would be willing to lend double or triple the amounts they have already lent which is what it would take to create the US government jobs programs necessary, and/or finance the infrastructure programs that would re-create the many millions of jobs that have been lost as a result of George W. Bush being appointed president.
The cost of just the effort to clean up and fix the damage done by our unprecedented gusher in the Gulf will, eventually, so far exceed anything that anyone is now considering that it will simply not be completed. Not even close. The effects of the collapse of the Gulf state economies and the potential loss of off-shore sources of oil will spread throughout the nation, indeed throughout the world. BP will never be able to pay for anything even approaching a sufficient restoration of the region. Neither will the US government be able to pay for it. Tens of thousands of refugees will be leaving the southern coastal area of the US in the next six months. If a hurricane hits the Gulf in the near term, the collapse and exodus of survivors may come even sooner.
The illusion that ever more economic growth is the way out of our economic crisis
Robert Reich is one of the smartest and most articulate economists out there. For those who may not remember, he was the Secretary of Labor under Bill Clinton's administration. As smart as he is, however, his advice to the president is to increase the national debt to spur economic growth. In this wrong-headed belief, he is in good company among the "illuminati' of economists. Paul Krugman, too, has been calling for substantially more stimulus from the US government for quite a while now. Both these brilliant men are of course hard-core Keynesians. [John Maynard Keynes famously pointed out that government spending could be used as a policy instrument to spur economic growth.] Even Republican president Richard Nixon adopted the notion that the US government should intervene in market conditions to keep the economy from tanking and ironically remarked, "We're all Keynesians now." On top of that, Ben Bernanke, head of the Fed, called for NO decline in government spending. "That will keep the economy on track to recovery," he said.
Well, if the government had the money to spend, that approach might work. Even when the country had to go into temporary debt to pay the bill, that approach was OK. But once again, that was then; this is now. The problem with Reich's and Krugman's call for more stimulus now is that the only way the US can spend money on stimulus is to go much deeper into debt. However, there is a major problem with any more indebtedness right now: Paying off debt tomorrow (which is the plan) depends entirely on growth of the real economy (making stuff), and that depends on increased energy flows in the future to do that work. However, as we've already noted, energy supplies are going into decline, not increasing, and will continue going into decline as time goes on. In addition, the ecological and environmental costs of ever more growth and consumption are becoming ever more prohibitive. (See: The Future of Capitalism -- Profits and Growth)
And once again: What kind of economy are these economists trying to stimulate back into growth? They say they want to create jobs so that consumers will have cash to go out and spend again. And what will these consumers spend it on? The answer to this question is: It doesn't matter as long as they spend! The gross domestic product (GDP), these economists claim, is the benchmark measure of the health of the economy. As long as the GDP is growing month over month, then all is well (they say). We have lived in a consumer-driven economy all these years, and have always revived it with more consumer spending. So, what these economists want to have happen is for the government to take on still more debt to once again provide businesses with monetary incentives to hire people so that those people will have incomes to go out and buy ever more stuff and ever more services, so that other people will have jobs and income to buy ever more stuff that needs to be bought. That has always been the formula for success.
But it is no longer. http://www.storyofstuff.com/
Like all neoclassical economists, Messrs Reich and Krugman believe in the closed loop version of macroeconomics: Money begets money, and as long as the money supply has good velocity without triggering inflation, then life will always be good for most everyone.
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