US News: The Danger of a Global Double Dip Recession Is Real

[futurebeachbum]

Interesting opinion piece at US News & World Report called The Danger of a Global Double Dip Recession Is Real. I strongly recommend reading it.

The author cites Spengler's 1918 classic The Decline of the West.:

His arguments were complex, but basically he suggested that the future of the West was not as limitless as his peers imagined after the ghastly World War I. His thesis was that civilizations had an underlying trajectory, an organic rise and fall; his metaphor was to compare the stages of this process to the stages of our seasons?but seasons of many centuries. In the 19th century we were, he suggested, in the winter of the West, witnessing the triumph of materialism, socialism, and money and that the era of individualism, liberty, and humanitarianism was nearing its end. (When the Nazis rose to power he seemed vindicated?he was a vehement critic.)

A century later he seems correct. He mentions myopic self-indulgence. (I believe this term accurately describes most of our politicians and their investors.)

The riots were certainly as much an example of myopic lethal self-indulgence as the sovereign debts in all the leading countries of the West. In France, students took to the streets protesting against a rise of just two years in the age of subsidized retirement?a system destined to bankrupt the state long before they, too, want the comforts that will be impossible to sustain.

It gets really interesting and he seems absolutely prescient when he discusses money and politics:

Among Spengler's convictions was that money, instead of serving mankind, would betray the Western civilization as it had others?and money in politics and media especially. If he could have seen this election season, he would have been even more downcast! Money is surely the great corrupter of American democracy. Congressmen have to spend more of their time raising money for misleading and defamatory television commercials?and resisting briberies of one kind or another?than they spend studying our predicaments.

The discussion of America's role in this is depressing. There are lots of nuggets like:

Total liabilities and unfunded promises for Medicare and Social Security were about $62 trillion at the end of the last fiscal year, tripling from the year 2000, according to the calculations of former Comptroller General David Walker. Sixty-two trillion dollars is $200,000 per person and $500,000-plus for the average household.

He questions military spending (although I believe China will significantly increase their military spending over the next few decades.)

China makes the best case for the primacy of economics. It is daily demonstrating that a country can become a global economic giant without becoming a global military power. Its strategic response to what's been happening is to shift the sources of GDP growth from external to internal markets.

Some of the really ugly discussion comes in the final third of the article.

There is a real danger of a global double dip. We face a general slide in confidence, the unwinding of the temporary fiscal boost to growth, and the negative reaction to the fiscal profligacy. Government budgets have been tightened around the world since Europe's crisis in May, providing additional headwinds to an economic recovery. Every country is facing ballooning government debt. In the countries of the Organisation for Economic Co-operation and Development, which are mostly in Europe but include the United States, government debt will go from 73 percent of GDP when the recession started in 2007 to over 100 percent next year.

I like a couple of the author's points on what we need:

What we clearly need is leadership with the will and the moral authority to govern on the basis of the long-term interest of the country.

and

Fiscal responsibility and discipline are going to be critical issues in the formulation of public policy.

Finally

America was founded on the principle of creating a better life for our children and grandchildren. We can do it. We aren't doing it.