(Reuters) – The FTSE dropped on Thursday in their worst one-day fall since March 2009, led by banks on concern the growth outlook for global economies was slowing and worries about contagion in the euro zone debt crisis.
It is gradually dawning on the global political elite that the economics they believe in do not work. They do not work, in particular, in the current crisis and continued pursuance of present policy is threatening a double dip recession (Morgan Stanley, the Bank of England’s Andy Haldane), a 1930s-style monetary collapse (Fed dissenter Richard Fisher), Eurozone breakup (Nouriel Roubini) and political mayhem (Jeff Sachs).
Free market economics caused the crisis and the rough-hewn Keynesian stimulus policies improvised in 2009 are failing to get us out of it.
Paul Mason http://www.bbc.co.uk/news/business-14579710
….. the two fundamental assumptions underpinning government policy have both failed.
There is no prospect of the private sector employment compensating for public sector retrenchment.
In addition there is no prospect of saving the cost of benefits by encouraging people back into work when there is none to be had.
In that case, George Osborne’s plans, and those of this coalition government, will fail. This presents two possible scenarios. The first is that the government will have to change plan, and that of course is possible, although the electorate almost invariably loses confidence in a government does a significant U-turn. The second possibility is that the government will not change its plans and we will face the most almighty recession, and significant poverty.
It must be rare in modern history for a Government’s economic policy to get such a comprehensive and universal thumbs down. But Osborne’s managed it. On every single aspect of policy the signals are now flashing red
A crisis that has been four decades in the making will not be solved overnight. It will be difficult to recast the global monetary system to ensure that the next few years see gradual recovery rather than depression. Wall Street and the City will resist all attempts at clipping their wings. There is strong ideological resistance to the policies that make decent wages in a full employment economy feasible: capital controls, allowing strong trade unions, wage subsidies, and protectionism.
But this is a fork in the road. History suggests there is no iron law of progress and there have been periods when things have got worse not better. Together, the global imbalances, the manic-depressive behaviour of stock markets, the venality of the financial sector, the growing gulf between rich and poor, the high levels of unemployment, the naked consumerism and the riots are telling us something.
This is a system in deep trouble and it is waiting to blow.
It seems that George Osborne ‘exaggerated’ when he described the UK as a ‘safe haven’. It is time to break the stranglehold of neoliberal capitalism.