- Germany Attacks US Economic Policy
- World Bank Chief Sparks Gold Standard Debate
- Irish Debt Woes Revive Concern About Europe
- Number of the Week: $10.2 Trillion in Global Borrowing
- China Newspaper Warns of Disaster Over Fed Move
- The New Malaise and How to End It
- Even Greenspan Admits that Moral Hazard and Fraud are the Main Problems
- Shining Light on the Cost of Solar Energy
On Friday, Mr Schäuble described US policy as “clueless”. In a Der Spiegel magazine interview, to be published on Monday, he expanded his criticism further, saying decisions taken by the Fed “increase the insecurity in the world economy”. “ They make a reasonable balance between industrial and developing countries more difficult and they undermine the credibility of the US in finance policymaking.” Mr Schäuble added: “It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their [central bank’s] printing press.”
Mr Zoellick, a former US Treasury official, calls for a system that “is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalization and then an open capital account”. He adds: “The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.” His views reflect disquiet with the international system, where persistent Chinese intervention to hold down the renminbi is blamed by the US and others for contributing to global current account imbalances and creating capital markets distortions.
An Irish bond market already in free fall plunged further after Ireland announced on Thursday that it planned to nearly double its package of spending cuts and tax increases to try to rein in its huge deficit. Investors took it not as a sign of resolve but rather of Ireland’s desperation and uncertainty about the true extent of its problems.
Next year, fifteen major developed-country governments, including the U.S., Japan, the U.K., Spain and Greece, will have to raise some $10.2 trillion to repay maturing bonds and finance their budget deficits, according to estimates from the International Monetary Fund. That’s up 7% from this year, and equals 27% of their combined annual economic output.
Aside from Japan, which has a huge debt hangover from decades of anemic growth, the U.S. is the most extreme case. Next year, the U.S. government will have to find $4.2 trillion. That’s 27.8% of its annual economic output, up from 26.5% this year. By comparison, crisis-addled Greece needs $69 billion, or 23.8% of its annual GDP.
The United States last week announced it would inject an extra $600 billion into its banking system in its latest effort to boost a fragile economic recovery, prompting criticism from a number of countries, notably China and Germany. The overseas edition of Communist Party mouthpiece the People’s Daily said in a front page commentary that this quantitative easing was bad for China and bad for the world.
The prevailing theory has it that U.S. policy makers should not deny our foregone fate. We should accept smaller improvements in output and employment and productivity. We should resign ourselves to the new normal and conduct policy accordingly. That is the last best hope, they argue, to preserve the remaining vestiges of a golden age that is no more.
I reject this view. I consider this emerging ethos to be dangerous and defeatist and debunked by America’s own exceptional economic history. Our citizens are not unwitting victims of some unavoidable fate. The current period of subpar growth and high unemployment is real, but it need not persist. We should not lower our expectations. We should improve our policies.
Even Alan Greenspan is confirming what William Black, James Galbraith, Joseph Stiglitz, George Akerlof and many other economists and financial experts have been saying for a long time: the economy cannot recover if fraud is not prosecuted and if the big banks know that government will bail them out every time they get in trouble.
A decade ago, fewer than 25,000 solar cells and modules were shipped in the United States every year. In 2008, that number had skyrocketed to more than 500,000. But that is still a drop in the bucket. Only about one-tenth of 1 percent of the energy consumed in the United States came from solar sources in 2008. In Germany, a country with a much more robust government incentive program, solar’s share is much larger, but still only 1.1 percent of that nation’s electricity.
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