Posted on 03/20/2013 6:25:43 AM PDT by SeekAndFind
Which country will serve as the trigger for the next financial crisis? Given the continuing rise in debt-to-gross domestic product (GDP) ratios in many countries, it is apparent that a new financial crisis will occur. Most of the speculation has been about when, rather than where. The most likely candidates are heavily indebted countries with a large growth deficit. The growth deficit is the difference between expected GDP growth and the expected government spending deficit as a percentage of GDP.
The way to eliminate the growth deficit is by either increasing economic growth or reducing government spending. Almost all economists understand that economic growth can be increased by (1) reducing taxes on labor and capital, (2) eliminating counterproductive regulations, and (3) putting an end to monetary uncertainty. Classical-Austrian school economists think that reducing government spending by itself, particularly when a country is highly indebted, speeds up economic growth because government spending tends to waste and misallocate resources. Keynesian economists think that government spending increases economic growth — particularly if a country is not heavily indebted and if the deficit spending only continues for a limited period of time. A few radical Keynesians (it is unlikely that the late John Maynard Keynes would have been one) think that almost any level of government spending is stimulative.
The academic argument is about whether the government spending multiplier is less than one (as most classical-Austrian school economists think) or greater than one (as the Keynesian economists think). In a new paper that reviews the empirical evidence and studies (Policy Analysis No. 721, Cato Institute), professor Andrew T. Young concludes: “Given weak evidence of significant short-run benefits, it is hard to justify stimulus spending packages in light of the almost certain and large long-run costs.”
(Excerpt) Read more at washingtontimes.com ...
like ODUNGO’S the first one is over..............
When did the financial crisis end?
I guess the question is this — if it never ended, will it get even worse?
We have passed Italy. That is insane. Hold on to your shorts.
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