Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on September 29, 2011
Jeff Rubin: Governments powerless to prevent another recession
The more you hear about the extraordinary efforts that governments around the world are taking to promote economic growth, the less confident you can be in the result.
With the clock ticking on a Greek default, members of the European Monetary Union are considering sweetening their bail out pot for a second time since the summer. The problem, however, is that a bigger bail out pot in Europe is not going to save Greece, whose economy is expected to contract at about 5 per cent for a second consecutive year. It is just going to make the write offs that much bigger for German taxpayers and French banks when the inevitable default finally occurs.
Nor is the U.S. Federal Reserve Board’s latest policy gimmick, ‘the twist,’ likely to prove any more effective in breathing new life into a stagnating economy than the measures to prevent a Greek default. The move, a throwback to an earlier attempt in 1961, has the Federal Reserve Board selling short-term securities to buy ones with longer dates up the yield curve. The goal, much like that of the Fed’s earlier tranches of quantitative easing, is aimed at bringing down long-term interest rates to resuscitate a moribund housing market.
But with long dated Treasury yields already near record lows, it is not the cost of mortgages, but the lack of jobs that stands in the way of Americans buying more homes. Without jobs, U.S. households are no more likely to buy homes than Greek households are to pay taxes. Other than potentially weakening the U.S. dollar, it is a classic case of a central bank trying to push on a string. And in this particular case, the greenback perversely strengthened, most notably against gold, leaving the Federal Reserve Board with nothing for its efforts.
With government deficits at record highs and interest rates already held to record lows, it is becoming increasingly obvious that European or North American governments have run out of policy options to sustain growth. Our economies appear to be heading inexorably into another recession, and there doesn’t seem to be anything our governments can do anymore to prevent it.
4 Comments on "Jeff Rubin: Governments powerless to prevent another recession"
DC on Fri, 30th Sep 2011 1:25 am
What economic growth are they trying to promote? Selling more gas-burners, more poorly built, leaky houses, I-junks designed to be obsolte in a year or two, what? We have allready have enough ‘stuff’, there is a surplus of poorly built housing and will be for years to come, and we sure as hell dont need any more gas-burners plying N.A.s poorly maintained highways. Growth based on buying and selling poorly built crud to each other is nearly at the point we cant take it any more. Im not suprised govts can do little any longer.
SilentRunning on Fri, 30th Sep 2011 4:16 am
It’s simple really: An economy built on oil will inevitably end up hemorrhaging money to the few remaining oil producing countries. Meanwhile, oil producing countries are growing their populations and consumption explosively. Eventually,the bidding frenzy for the oil on the market saps the strength of the global economy, and we slide down another notch towards blackouts.
Kenz300 on Fri, 30th Sep 2011 4:39 am
We have an oil crisis, an energy crisis, a financial crisis, a water crisis, a jobs crisis, an immigration crisis and a population crisis. Too few resources meets too many people. Endless population growth is not sustainable. It will not end well.
BillT on Fri, 30th Sep 2011 4:59 am
We never left the Great Recession. The government spin on ‘statistics’ pretends that we did to keep the populace from panicking, but it is all smoke and mirrors. We are headed for Great Depression 2 or worse. There is nothing to prevent it in the coming years. The days of cheap, plentiful energy are over and that is all that made this whole thing possible in the first place.