Keynes Was Right

It is worth pointing out that the British economic policies that have led Britain back into recession are exactly the same policies pushed by Congressman Ryan and other Republicans in Congress. What we need, instead, is more government spending to bring us back into prosperity.

I am not the only one who has come to that conclusion. Increasingly, members of the business community are recognizing that austerity is exactly the wrong approach.

Read, for example, this article in Business Insider by its editor, Henry Blodgett. Blodgett explains clearly why austerity doesn't work:

"The reason austerity doesn't work to quickly fix the problem is that, when the economy is already struggling, and you cut government spending, you also further damage the economy. And when you further damage the economy, you further reduce tax revenue, which has already been clobbered by the stumbling economy. And when you further reduce tax revenue, you increase the deficit and create the need for more austerity. And that even further clobbers the economy and tax revenue. And so on."

Of course, that is what Keynesians have been saying all along. 

So, how did we get where we are? Blodgett explains:

"Most of the debt mountain we've piled up is the result of what we did before the crisis, not after it. In the years leading up to 2007, our absurdly undisciplined leaders took a nice big budget surplus and then squandered it. And they created absurdly loose lending standards and encouraged the whole country to lever up and buy stuff we couldn't afford. And they never said "no" to anything except tax increases, no matter what, and denied all the structural problems that were building up for decades.

"And by 2007, they had put us in one hell of a hole.

"And, given that, it seems reasonable to think that, as Krugman has long argued, one of the problems with the economy now is that the original stimulus just wasn't big enough."

By the way, businessmen realize that the problem holding back business investment is lack of customers (aggregate demand), not regulation or "confidence" in any psychological sense. Show them some customers and they will invest.

Britain In Recession

Official data released today shows that Britain has slipped into a new recession.

Britain's new recession is not a direct consequence of policies of the European Central Bank, because Britain is not in the Eurozone. It retains its own currency, the pound.

But the Cameron government has been following a policy of economic austerity, insisting that this will lead to economic expansion.

Apparently, not so much.

Actually, Britain's recovery from this recession is worse than its performance in the 1930's following the Great Depression.

More On The South Avenue Deal

Today's Parks and Rec meeting was good, because attendees asked a number of probing and worthwhile questions. Those interested in taking another look might want to review some earlier observations I made here.

I think my previous post covers most of the issues. I'd be happy to answer any questions anyone may have. Contact me at: cox.d.r@att.net.

South Avenue Special Meeting

This morning a special meeting of Oriental's Parks and Recreation Board met at the intersection of Avenue A and South Avenue. According to my sources, some assertions were made that may not be entirely factual, and questions raised to which the answers are available.

For those curious about background details, I recommend a search in this blog site for "South Avenue." I have made a lot of posts, in considerable detail, over the past three years. One post, that shows the survey of the intersection by Dennis Fornes, is worth taking a look at: http://mile181.blogspot.com/2010/06/south-avenue-street-end.html

The pink wedge shows where the pavement curved around to the left from South Avenue. There has been discussion since winning the case, that the town would have to tear up the pavement and return the wedge to the owner of the corner lot.

It ain't necessarily so. So far as I have been able to tell, that curve has existed since at least 1936 and probably from as far back as the 1920's. The public has been using that curve in the road as a right of way all that time. That is more than sufficient time to establish the curve as town right of way by prescription.

The town can certainly abandon that portion of right of way, following a public hearing, just as it can abandon rights of way established by other methods. But there must be a hearing.

More on this set of issues later.

More On Europe And The US

Good article in today's Guardian concerning the economic and political turmoil in Europe and the continued intransigence of her economic leaders. The author, Robin Wells, predicts the US may suffer collateral damage.

Spain In Recession

It was announced this morning that Spain is officially in recession. Not a surprise. Spain, like other countries in the periphery of Europe, has been pressed by Germany and the European Central Bank to pursue policies of economic austerity. This is guaranteed to make things worse. Paul Krugman recently (and accurately) identified what was happening in Spain as insane.

But the insanity is not confined to Spain. It is happening everywhere in Europe, but voters are beginning to push back. Spain's unemployment rate, by the way is 23.6% and among young people about 50%. Austerity will make this worse. Is Europe committing economic suicide? Or just political suicide?

In the Netherlands, already in recession, the government has resigned after failing to get approval for further austerity measures.

Guess what? The economic measures causing such distress in Europe are just like the ones contained in Paul Ryan's budget.

Two years ago, the Republican narrative was that it was the budget deficit that caused the economic decline and loss of jobs. I would call that an intentional lie, except there are some voodoo economists playing for team Republican who still hawk those wares.

But it isn't true. It is true that economic crises and the resulting loss of jobs and income causes budget deficits. More government spending is still the most effective and speedy remedy for declines in aggregate demand that result from unemployment, even while spending on such safety net measures as extended unemployment benefits protects businesses from even more precipitous declines in their customer base.

Europe On The Edge

This weekend's elections in France may portend a serious shakeup in European politics. Nicolas Sarkozy lost the first round of elections to the Socialist candidate, Francois Hollande. There will be a runoff election between these two leading candidates on May 6.

I had previously suggested that the first decade of the Euro could well be the last. For awhile, it appeared that the Greek government might be the most vulnerable in Europe to a repudiation by the electorate of austerity measures. Clearly this past weekend, French voters sent a strong signal. It seems increasingly likely that European voters in other countries will reject the austerity forced on them by the European Central Bank under the strong influence of Germany.

"It [the election] may also represent the first stirrings of a challenge to the German-dominated narrative of the euro crisis, which holds that public debt and runaway spending are the main culprits and that austerity must precede growth." - NY Times.

It has been obvious to what I would call the sensible economists (those of a Keynesian bent) for a long time that austerity in a time of recession will not lead to growth. It should have been equally obvious to political leaders that intentionally causing a depression in one's own country is not a recipe for reelection.

Over the weekend, the Dutch government failed to gain majority support for austerity measures, and more Czechs turned out to protest a tax increase and budget cuts than any protest since 1989.

Other countries whose voters increasingly press for growth instead of austerity include Great Britain, Spain and Italy.

It may be possible to rescue the Euro, but it looks more and more difficult.

Chickens In Cary

Just noted in the News and Observer:

"Cary is set to legalize backyard chickens as early as this summer. A 5-2 majority of the Cary Town Council has endorsed a plan to allow six hens per house in backyard coops across town.

"The governing board on Thursday night suggested that residents pay a $50 initial fee and an as-yet undetermined annual fee for the chicken-keeping priviledge.
Mayor Harold Weinbrecht and Councilman Jack Smith voted against the overall idea of backyard chicken legalization, but will help shape a compromise ordinance. The new rules would take effect immediately upon adoption in June or July."

Some of us on Oriental's town board tried three years ago to modify our ordinance, (a disguised anti-chicken provision) to allow backyard chickens in our small rural town, population 900, at the end of the highway. I was astounded at the opposition.

If Cary, a town of 94,000 with an urban/suburban environment can have chickens, how come we can't?

Read more here: http://www.newsobserver.com/2012/04/19/2012336/cary-council-endorses-backyard.html#storylink=cpy