On Fiscal Consolidation And Currency Devaluation At The G-20 And Other Links

G-20 Thoughts

I am going to be talking about the G-20 tomorrow at 700 London Time/1200 East Coast Time on BBC World News. The key issue is fiscal consolidation. I am taking the German side of this (see Why I am siding with the Germans on fiscal consolidation) rather than George Soros’ regarding the euro zone (see Soros attacks Germany’s hair-shirt politics).

I may write up something regarding the US and the UK. The short-hand view I have is that, while the UK and US are less constrained, politically, stimulus is a loser. It is already out in the UK and it is unlikely to gain traction in the US. Malinvestment into the FIRE sector is the key issue which hangs over stimulus as a policy tool (seePrison inmates among those abusing home buyer tax credit – USATODAY.com). I hope to explain why in greater detail a future post.

Irrespective there are other issues like competitive currency devaluations (More on Competitive Currency Devaluations) which loom, especially given the still acrimonious China-US currency relationship.

Also see:

The Usual Fare

  1. nadezhda says

    Looking forward to your thoughts on why fiscal policy in the US won’t have much traction. I agree with your observation re the FIRE monster. But I think that simply means that focus on the supply side is misguided. And focus on the demand side that tries to work thru investment decisions (household or business) is also not likely to produce much. Monetary policy is mostly just keeping the markets from freezing up again.

    However, I think there’s no reason why demand-side spending — whether it’s funding plumetting state spending on teachers or Medicaid or infrastructure investment — isn’t still not just effective but essential. If only in employment terms. And the amount of additional debt is piddly.

    Anyway, looking foward to your thoughts.

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