Today's Stories

September 29, 2009

Marshall Auerback
A Neoliberal Hijacking

Alan Farago
Recovery Without Feeling

Jonathan Cook
Palestinians in the Israeli Army

Bouthaina Shaaban
Arabs in the International Balance

September 28, 2009

Laura Carlsen
The Sound and Fury of the Honduran Coup

Anthony DiMaggio
The U.S., Iran and Nuclear Terror

Paul Craig Roberts
More Lies, More Deceptions

Neve Gordon
On Palestinian Civil Disobedience

Bill Quigley
Street Report From the G20

Harvey Wasserman
Obama's LBJ Moment

Nicola Nasser
Stuck Between Two Failures

Ben Rosenfeld Murder in New Orleans: Remembering Kirsten Brydum

Website of the Day
The Short March

September 25-7, 2009

Alexander Cockburn
The Ruin of His Presidency

Daniel Wolff
Speculating on Education

Rev. William E. Alberts
How "White Magic" Makes the Ism of Race Disappear

Mike Roselle
Send Lawyers, Guns and Money

Saul Landau
Covert Memories From Miami

Eshan Azari
Why Afghan Intellectuals Live in National Despair

Winslow T. Wheeler
The Pentagon Feedlot

Robert Jensen
Is Obama a Socialist?

Jonathan Cook
Sleeping with the Enemy

Nelson P Valdés
Cuba, Hurricanes and the Internet

David Michael Green
Dumping Dubya

Ramzy Baroud
The Goldstone Report and Israeli Impunity

John V. Whitbeck
The Partition Straightjacket

Andy Worthington
Gitmo Trial Delayed ... Again

David Ker Thomson
The Lady Vanishes

Seth Sandronsky
Obama and Race Management

Jim Goodman
Why are Farmers Afraid of Michael Pollen?

Charles R. Larson
From Oppression to Opportunity

David Yearsley
Froberger's Travels

Kim Nicolini
Hardcore Capitalism

Lorenzo Wolff
Transparent Pink

Website of the Weekend
An Emergency Appeal in the Fight Against Big Coal

September 24, 2009

Steven Higgs
Even in Indiana, Doctors Support National Health Insurance

Christopher Brauchli
Death Pays

Marshall Auerback
The Shortfall at the FDIC

Stephanie Westbrook
Italy's Fallen Soldiers

Nadia Hijab
Know Your Dictator

Sen. Russell Feingold
Fixing the Patriot Act, Restoring the Constitution

David Macaray
Goodbye "Norma Rae"

Binoy Kampmark
Curry Bashings in Oz

Joe Allen
Dancing With the Hammer

Website of the Day
The Most Corrupt Members of Congress

September 23, 2009

Paul Craig Roberts
The Economy is a Lie, Too

Gabriel Kolko
The United States in Afghanistan: Eight Years Later

Uri Avnery
The Waldorf-Astoria Summit

Shamus Cooke
The First Shots of the Trade War

Missy Beattie
The Sound of Money

Gareth Porter
Taliban Rising

Mark Weisbrot
How Much Repression Will Hillary Clinton Support in Honduras?

Dr. Susan Block
The Murder of Annie Le

Norm Kent
Pot and the Right to Pursue Happiness

Richard Neville
Apocalypse Porno

Website of the Day
In Carver Country

September 22, 2009

Franklin C. Spinney The Huge Hole in Gen. McChrystal's Afghan Counterinsurgency Strategy

Russell Mokhiber
Who's the Pimp?

Greg Grandin
Zelaya's Brazilian Gambit

Nikolas Kozloff
Salvaging Democracy in Honduras Will Be Tricky

John Ross
Mexico Convulsed by Paranoia

Ron Jacobs
Gen. McChrystal's Salespitch

Tariq Ali
The Afghan Folly

Dave Lindorff
NYT Trashes Single-Payer

Harvey Wasserman
Tom Friedman's Idiocy Atomique

Vijay Prashad
Is Anything Better Than Nothing?

Kareem Shora
After the CIA Torture Report

Website of the Day
Did a State Dept Official Sell Nuclear Secrets?

September 21, 2009

JoAnn Wypijewski
Will Trumka or the Steelworkers Push Labor Into Battle?

Carl Finamore
Backstage at the AFL-CIO Convention

Uri Avnery
Sliming Goldstone and His Report

Nikolas Kozloff
Joe Wilson's Immigration Hypocrisy

Paul Simpson, M.D.
Why Your Doctor May Have PTSD

Alan Nasser
New Deal Liberalism Writes Its Obituary

Ray McGovern
CIA Torturers Running Scared

Dave Lindorff
Thoughts on Saving an Old Barn

Lina Thorne
Women, War and Afghanistan

Jeb Sprague
Confronting the G20

Website of the Day
Petition: Save the Yellowstone Grizzly

September 18-20, 2009

Alexander Cockburn
When Gossip Came Back and Our Modern Age was Born

Russell Mokhiber
Meet the Real Death Panels

Mike Whitney
The Post-Bubble Malaise

David Michael Green
Can America be Salvaged?

Jonathan Cook
Boycott Derails Jerusalem Rail Line

Nadia Hijab
Sinking the Goldstone Report

Mark Weisbrot
Recession, Recovery and Reform: Will Anything Change?

Michael Winship
Let's Make a Deal, Beltway Edition

Michael Leonardi
The Nuclear Dump in the Mediterranean Sea

Andy Worthington
The Kuwaiti Who Met Bin Laden

Fred Gardner
The Prohibitionists' Manifesto

David Macaray
What Happens in Congress Stays in Congress

David Rosen
System Failure and the Garrido Case

Jason Mark
Hacking the Sky

Mike Ferner
In Praise of Senator Baucus

Farzana Versey
The Great Indian Rope Trick

Ron Jacobs
Dr. Guillotin and Dr. Faustus: an Interview with Marc Estrin

elin o'Hara slavick
Flags for Hiroshima: Artist's Statement

Gilad Aztmon
Vengeance, Barbarism and Tarantino's Inglourious Basterds

David Yearsley
Mendelssohn as Organ Maestro

Charles R. Larson
Darkness, Dignity and Hope in Liberia

Lorenzo Wolff
Dialing Up The Clash

Website of the Weekend
Meet Your Conservative Movement

September 17, 2009

Joshua Frank
Max Baucus: the Slick Swindler

Brenda Norrell
Cry Me a River: Uranium and Genocide in Indian Country

Robert Weissman
The Financial Crisis, One Year Later

Pam Martens
The Filmmakers vs. the Capitalists

Franklin Lamb
Palestinian Camps Are Ready to Erupt

Ricardo Alarcón de Quesada
Cuban Five: An Insult to Humanity

Jed Bickman
Drone War Over Pakistan

Alan Farago
The Mayor of Coconut Creek Gets Butterflies

Website of the Day
C.R.O.C.

September 16, 2009

Ray McGovern
Torture and Accountability

Stephen Green
America's Strange Health Care Debate

Andy Worthington
Is Bagram Obama's New Secret Prison?

Dean Baker
Short Sellers: the Unsung Heroes of the Financial Crisis

Anthony DiMaggio
Killing the Messenger

Ricardo Alarcón de Quesada
Cuban Five: The Unheard Call

Benjamin Dangl
Justice Follows Direct Action

Robin Willoughby
The World Seed Conference: Good for Farmers?

Eric Walberg
EuroPeace, the Sounds of Silence

James Ridgeway
Bring That "Boy" Down

Website of the Day
Baucus' Bogus Bill

September 15, 2009

Mike Whitney
The Real Lesson of Lehman's Fall

Mutadhar al-Zaidi
The Story of My Shoe

Marshall Auerback
Government Spending is the Solution--Not the Problem

Afshin Rattansi
The Deal That Led to the Srebrenica Massacre: Former UN Spokeswoman Fingers Holbrooke and the Clinton Administration

Jonathan Cook
How US Tax Breaks Fund Israeli Settlers

Gareth Porter:
Niger Redux? IAEA Conceals Evidence Iran Nuke Docs Were Forged

Dave Lindorff
Congress Needs More Catcalls

Winslow T. Wheeler
Obama and Pentagon Pork

Franklin Spinney
Bin Laden's Latest Message and the Nuttiness of the War on Terror

Karen Korenoski /
Michael Yates
Up in Wood Smoke: Boulder's Dirty Little Secret

David Macaray
Government Cheese

Susie Day
President Mao-bama's Little Red Primer

Website of the Day
The Cotton Pickin' Truth: the Persistance of Slavery in Mississippi

September 14, 2009

Paul Craig Roberts
The Health Care Deceit

M. G. Piety
The Danes Do It (Health Care) Better

Shamus Cooke
Wall Street Under Obama: Bigger and Riskier

Bouthaina Shaaban
Three Faces and a Homeland

Alvaro Huerta
In Defense of the Undocumented: Immigrants and Health Care

John Ross
Mexico Loses Its History

Harvey Wasserman
The Supreme Court and Corporate Money

Adam Federman
The Plight of the Bumblebee

Stephen Fleischman
The Federal Twist

Robert Jensen
Can Journalism Schools be Relevant in a World on the Brink?

Website of the Day
The Origin of Sex Offender Registries

September 11-13, 2009

Alexander Cockburn
Obama's Big Speech: Math Trumps Rhetoric

JoAnn Wypijewski
Trumka Takes Over AFL-CIO

Carl Ginsburg
The Patient as Profit Center

Leonard Peltier
I am Barack Obama's Political Prisoner Now

Franklin Lamb
Ted Kennedy's Changing Take on Israel

Benjamin Dangl
Throwing Bullets at Failed Policies

Mike Whitney
How to Fight Deflation

John Berger
In Search of Antonello

Saul Landau
Watergate and Modern Scandals

Russell Mokhiber
Disgraceful Democrats

Ricardo Alarcón de Quesada
Pryor's Judgment

Felice Pace
NPR's Linda Gradstein Has Done It Again on Gaza

Jordan Flaherty
The Battle Over Discriminatory Housing Laws in New Orleans

Ron Jacobs
It's Time to be Impolite About Afghanistan

David Macaray
The Utility of Boycotts

David Correia
Welcome to the Business-Friendly Carpenter's Union

Robert Bryce
Wind Turbines and Bird Kills

Christopher Brauchli
Defenders of the Classroom

Paul Krassner
Aha! A Few Words About the 9/11 Truth Movement

Charles R. Larson
Deracination

Kim Nicolini
"Extract:" An Exercise in Economic Realism

David Yearsley
Tall Buildings: the Sound and the Silence

Lorenzo Wolff
In Defense of the One Hit Wonder

Poets' Basement
McEnteer and Corseri

Website of the Weekend
Pizarchik: the Wrong Choice

September 10, 2009

Joshua Frank
Inside Hanford's B Reactor: a Tour of the World's Most Toxic Nuclear Site

Dean Baker
Bernanke's Bad Money

Brian M. Downing
The State of U.S. National Security

Franklin C. Spinney
Portrait of an Afghan Firefight: Up Close and Personal

Andy Worthington
No Escape From Guantánamo

Chase Madar
Samantha Power and the Weaponization of Human Rights

Farzana Versey
A Tale of Two Slums

Ronnie Cummins
Whole Foods, Fair Trade and Organics

Binoy Kampmark
Health Care, Obama and the System

Timothy Lebrón
The Conservative Case for Health Care Reform

Charles R. Larson
A Solution to the Health Care Dilemma

Website of the Day
The Debtor's Revolt Begins!

September 9, 2009

Richard Neville
Trigger-Happy in Afghanistan

Melissa Checker
Double Jeopardy: Carbon Offsets and Human Rights Abuses

Nadia Hijab
Settling for ... Settlements?

Robert Weissman
The Stakes at the Supreme Court

Jonathan Cook
Israeli Arabs Call for General Strike

Russell Mokhiber
Pollan, Mackey, Whole Foods and Single Payer

James Ridgeway
The Dotty Factor: Will Demented Geezers Wreck the Economy?

Richard W. Behan
Obama's Imperative in Afghanistan

James McEnteer
The Photo and the Secretary: How to Appall Robert Gates

Martha Rosenberg
Hatchery Horrors

Website of the Day
Belmondo Verité

September 8, 2009

Henry A. Giroux
The Corporate Stranglehold on Education

Stephen Soldz
Psychologist Accused of War Crimes Opposes Investigations

John Ross
Rituals of the Absurd

Jeff Leys
Health Care vs. Warfare: the Future of the Afghan War

Mike Whitney Ashcroft: Repugnant to the Constitution

Shamus Cooke
Obama's Empty Labor Day Speech

Ellen Brown
Did Lehman Brothers Fall or Was It Pushed?

Norman Solomon Men With Guns: In Kabul and Washington

Deepak Tripathi
The Axis of Evil and the Great Satan

Laray Polk
Personality Cults, Indoctrination and Inculcation

Charles R. Larson
Just Who Does He Think He Is?

Website of the Day
The President is Not a Guidance Counselor

September 7, 2009

Vicente Navarro
Obama's Mistakes in Health Care Reform

Bouthaina Shaaban
In Praise of Admiral Mullen

David Macaray
Obama's Labor Day Report Card

Paul Craig Roberts
Indefensible Nation

Jonathan Cook
Israeli Ads Warn Against Marrying Non-Jews

Conn Hallinan
Brazil Flexes Its Muscles

Walter Brasch
The Origins of Labor Day, the Unknown Holiday

Mark Weisbrot
IMF Gives Honduran Government $175 Million

Carl Finamore
China's Birthday Stimulation

C. G. Estabrook
Advance Text of Obama's Big Speech

Website of the Day
One Down, 20,000 to Go

September 4-6, 2009

Alexander Cockburn
Deeper Into the Tunnel

Carl Ginsburg
Saving New Orleans' Charity Hospital

Jonathan Cook
The Missing Link in Israeli Organ Theft?

George Wuerthner
The Unintended Consequences of Wolf Hunting

Marc Levy
The Bling They Curse and Carry

Ray McGovern
Holbrooke's Afghan Benchmark

Ricardo Alarcón de Quesada
It Happened in Miami

Joe Paff
Organizing the Mission

Gareth Porter
Taliban's Tank-Killing Bombs Came From CIA, Not Iran

Devin Beaulieu
Scaremongering About Bolivia and Islam

Anthony Papa
Why Leslie Crocker Snyder Should Not Become New York City's New DA

David Ker Thomson
Love and Dekes in Utopia

Don Fitz
The Case of the Biodevastation 7: What the Police Won't Apologize For

Lee Sustar /
S. Sepehri
The Fallout From Iran's Elections

Jim Goodman
Why Honor Organized Labor?

Wajahat Ali
Domestic Crusaders: Making Muslim American Theater

Ron Jacobs
Agitator Journalism: Remembering Ramparts

Helen Redmond
The Lion Sleeps Tonight: the Crimes and Misdemeanors of Teddy Kennedy

John V. Walsh
Obama to Cindy Sheehan: Get Lost

Charles R. Larson
Mandanipour's Masterpiece: Censoring an Iranian Love Story

Mark Scaramella
Ho-Bleeping-Hum: a Few Well-Chosen Words About Valerie Plame's Book

David Yearsley
Cameron Carpenter's Amazing Organ Transplants

Ben Sonnenberg
Hooking, Breaking Friendships, Cross-Dressing and, Above All, Delphine Seyrig

Poets' Basement
Davies, Orloski and Bready

Website of the Weekend
Architectural Semiotics with Glenn Beck

September 3, 2009

Marcus Rediker
Inside Auburn Prison

Ron Jacobs
Embedded With the Taliban

Mike Whitney
How Bad Will It Get?

Ricardo Alarcón de Quesada
Untold Story of the Cuban Five: Indictment À La Carte

Saul Landau
Moby Dick and Asian Typhoons

Anat Matar
Israeli Academics Must Pay a Price to End Occupation

Tanya Golash-Boza
How Immigration Enforcement is Weakening National Security

Dave Lindorff
Which Side Are You On?

Andy Worthington
The Story of Gitmo's Two Syrians

Website of the Day
Plundering Appalachia

September 2, 2009

John Ross
Mexico's Plagues

Vijay Prashad
Hey Ram, the Things the Financial Times Group Does!

Rev. Jim Rigby
Why is Universal Health Care "Un-American"?

Joanne Mariner
What the Inspector General Found

Missy Beattie
Hejira: At Martha's Vineyard with Cindy Sheehan

Soren Ambrose
Multilateral Money

Diane Farsetta
Water: the Newest Wave of Corporate "Social Responsibility"

Nadia Hijab
Mulling Mullen's Message

Shamus Cooke
How to Lower the Deficit Without Killing Social Security

Charles R. Larson
Is Dick Cheney Running Scared?

Website of the Day
Inside the Egg Hatchery

September 1, 2009

Jeffrey St. Clair
The Wolf at Trout Creek

Paul Craig Roberts
Why Not Sanctions for Israel?

Mark T. Harris
The Whole Foods Boycott: It's About More Than CEO Hypocrisy

Dean Baker
Bank Profits Are Up: Did You Hear Anyone Say, "Thank You"?

Jeffrey Buchanan
Ending the Human Rights Crisis in KatrinaRitaVille

Robin Mittenthal
A Sea of Monocrops: Old MacDonald Never Had a Farm Like This

Ellen Brown
Mercury Mischief

Martha Rosenberg
Vytorin Marketing is Back

Website of the Day
Crazy Town Hall Protester Interviews

September 29, 2009

The G20 Summit

A Neoliberal Hijacking

By MARSHALL AUERBACK

As a matter of national accounting, the domestic private sector cannot net save unless and until foreign or government sectors net deficit spend. Call this the tyranny of double entry bookkeeping:  the government’s deficit equals by identity the non-government’s surplus. 

Hence, if the US private sector is to rebuild its balance sheet by spending less than its income, the government will have to spend more than its tax revenue. The only other possibility is that the rest of the world begins to dis-save massively—letting the US run a current account surplus—but that is highly implausible, and socially undesirable, since it means we export our economic output, rather than consume it domestically. And if the government deficit does not grow fast enough to meet the saving needs of the private domestic sector, national income will decline, which, given the size of the private sector’s debt problem, will generate a huge debt deflation.

This is the foundation of modern monetary theory.  Would that the IMF and the G20 understood these basic facts.  The anodyne communiqué from last weekend's Pittsburgh summit makes clear that this is not the case.  Western policy makers appear determined to consign us to years of additional economic misery because of the continued embrace of a flawed market fundamentalist economic paradigm. 

So far, instead of trying to revive the productive economy, most of the G20's resources have consisted of mouth-to-mouth resuscitation for a dying financial sector.  This has not "worked" to the extent that last weekend's communiqué advertised.  The best analogy to describe the current state of our financial system is that we have placed scaffolding over a decaying building, but done little to repair the underlying structure.  What happens when the economic scaffolding is removed via "exit strategies", as the G20 participants have advocated?

For many generations, we didn't face the unprecedented financial fragility we are experiencing today. But there are good reasons why we avoided this until recently.  We have spent the past quarter century eviscerating what was fundamentally a robust structure originally devised during New Deal, a system which basically saved the US capitalist system and served the interests of its citizens very well until it was hijacked by a bunch of corporate predators under the guise of deregulation and neo-liberalism. 

To read the communiqué from the Pittsburgh summit is to gain insight into an ideology which views government, not as a stabilizing influence protecting us from private sector rent seeking monopolists, but as an unwanted stepchild, brought out on display as a necessary evil, and destined to be shoved away as soon as we get back to a "normal" economic state of affairs, where the government minds its own business and lets the magic of the "free market" operate.  Hence, the emphasis by the Pittsburgh summiteers on "sustained, strong and balanced growth",  the usual code words designed to encourage budget surpluses, more private sector savings and shift from public to private sources of demand. 

There is little understanding that if households and firms try to net save (save more out of income flows than they tangibly invest) incomes collapse, and desired private net saving is thwarted. The private "excess saving" cannot exist without a budget deficit or a trade surplus. Many people make this mistake. At best, we can talk about planned private saving being in excess of planned private investment, but other than that, we are violating double entry book keeping principles.

But consider this: in 1998, 1999 and 2000 (increasing each year), the US government "virtuously" ran budget surpluses. And guess what happened? The private sector became more heavily indebted than before as the fiscal drag squeezed liquidity and destroyed aggregate demand and incomes. Along with our misconceived embrace of financial deregulation, the combined result was sharply rising unemployment and a major recession in 2001-02 with unemployment rising sharply and the automatic stabilizers pushing the budget back into deficit. 

Unfortunately, that was the yellow flag for what was to follow, a warning signal blithely ignored by our economically illiterate policy makers. Instead, we perpetuated a massively leveraged financial system via Frankenstein financial products such as collateralized debt obligations, and credit default swaps.  We squeezed private sector incomes via constrictive fiscal policy, thereby inducing the debt fuelled consumption that is now regularly decried by our officialdom and the commentariat. 

The bottom line is that if we want habitual private sector savings, we need habitual government deficits.

And government deficits are not an aberration; they are the norm.  Our first Treasury Secretary, Alexander Hamilton, called the national debt a "national blessing".   Similarly, Paul Krugman and L Randall Wray have been only the latest in a line of economists arguing  that it was World War II and the subsequent cold war that ended the depression, which created the foundations for a significant expansion of government debt, which in turn set the stage for the “Golden Age.” The government deficit reached 25 percent of GDP during the war, providing a massive amount of private sector saving in the form of safe financial assets that strengthened balance sheets. From 1960 onward, the baby boom drove rapid growth of state and local government spending, so that even though federal government spending remained relatively constant as a percentage of GDP, total government spending grew rapidly until the 1970s. This pulled up aggregate demand and private sector incomes, and thus consumption. 

This is unsurprising: The private sector cannot create "net nominal wealth" because every private financial asset is offset by a private financial liability. Over the long term, the maximum that a government can hope to collect in the form of taxes is equal to its purchases of goods of services.  There is no hope of running long term budget surpluses because the government cannot possibly collect more than the income it has created as it paid out dollars.  When the government attempts this, as it did during the Clinton Administration, the public finds that its net financial assets would be less than its tax liability, requiring households to dip into its "reserves" of accumulated savings, which gradually become depleted.  In the absence of other factors, demand slows and the government almost invariably falls back into deficit. 

If an external creditor is added (such as China or Japan) it merely delays or extends the process, since for a time, countries running current account surpluses with the US can use their surplus dollars to accumulate additional US dollar financial claims.  But in the absence of any increase in US government spending (which is the only source of new net financial assets), the end result is still a massive accumulation of private sector debt, which is what got us into this mess in the first place.  By contrast, assuming a non-convertible, freely floating fiat currency, a government can never be insolvent even if its tax revenue declines significantly. Its balance sheet can never become precarious in the same way that a household balance sheet can.

In the abstract, this always sounds controversial to those uncomfortable viewing the world within a financial balances construct. It also helps to explain the intellectual incoherence at the heart of the G20 communiqué and the Obama Administration's economic policies, which has been dominated by Wall Street interests. 

So it's worthwhile considering some historic examples, which illustrate the point better.  During WWII, the US government generated huge deficits and bond issues.  The record expansion of government deficits not only facilitated the war effort, but created full employment.  (As an aside, it is always interesting to pose the following question to "deficit terrorists ": if government budget deficits are so awful, and so egregious for the long term performance of an economy, then why run them at all during wartime, when presumably we need the economy to be functioning in an optimal manner?) 

After the war, the Fed was concerned with potential inflationary pressures and raised interest rates. President Truman, a hard money man par excellence, drastically cut defense spending from $90.9bn to $10.3bn and the US accumulated huge fiscal surpluses.  Post war surpluses, combined with Fed tightening, contributed to a recession in 1949.  Unfortunately, it took the "military Keynesianism" brought on by the Korean War to shift Truman away from his aversion to deficit spending, which was continued by Eisenhower, and sustained via his national highways building program.  Unemployment  fell sharply during that period.  Similarly benign effects on unemployment were manifested in the wake of the Kennedy tax cuts and those of Reagan in the early 1980s.

Today, budget deficits are the highest as a percentage of GDP but are overstated to some degree, because they include the TARP measures to stabilize the financial system which brought the global economy to its knees in 2007/08.  Classic Treasury expenditures deal with the purchase of real goods and services; Federal Reserve functions deal with the purchase and sale of financial assets.  And yet, the focus of policy makers is quickly reverting to "exit strategies" and a reduction of budget deficits, where the Pittsburgh communiqué  pledged to "prepare our exit strategies and, when the time is right, withdraw our extraordinary policy support in a co-operative and co-ordinated way, maintaining our commitment to fiscal responsibility." Would that this were true.  The only way one could politically justify a government running a sustained surplus would be to make the case that unemployment created a more functional way of ensuring high profits (via wage discipline) than full employment.  Put in those terms, it's not a particularly compelling message, but it has the virtue of being consistent with modern monetary theory.

Oddly enough, the G20 communiqué devotes considerable attention to the government’s "exit strategies" which came in response to the destructive private sector  financial practices which created this catastrophe.  There has been less attention directed to the underlying causes themselves.  Thus the IMF,  in its latest "Global Financial Stability Report”, suggests that  restarting securitization markets is “critical” to a wider economic recovery, and that current US and European proposals to force banks that originate loans to hold on to the first 5% of losses in all securitizations, were not sufficiently flexible and might backfire. In the words of Credit Lyonnais Asia strategist, Christopher Wood,

"[The IMF] is yet again doing the world a disservice by acting as a lobbying group for the securitised debt peddlers. It is clearly fundamentally correct that the agents of securitisation should be made to retain some 'skin in the game' after the terrible damage they have inflicted. It is true that the collapse of securitisation represents a massive deflationary risk for the global economy. But that does not mean that the answer is to allow a new free-for-all in securitisation assuming, charitably, there is demand for the securitised product." ("Greed and Fear", 24 Sept. 2009, CLSA, Asia Pacific Markets)

The IMF, the G20, indeed virtually all Western policy makers - including the Obama Administration - will make themselves far more relevant when they emphasize that full employment and prosperity can only be achieved to the extent that governments are prepared to spend up to a level justified by non-government saving. That does not mean unconstrained government spending.  . But the spending ought to be set with regard to results desired and competencies to execute plans—not out of some pre-conceived notion of what is “affordable”. Our federal government can afford anything that is for sale in terms of its own currency. And if it spends too much after getting us to a state of full output, it can get inflationary. But let's get to that state of affairs first before we start worrying about perpetuating a flawed status quo ante, which created only transitory prosperity and wage gains, but risks creating years of future economic misery if sustained in the future.

Marshall Auerback is a market analyst and commentator. He is a brainstruster for the Franklin and Eleanor Roosevelt Institute. He can be reached at MAuer1959@aol.com

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