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Peter Schiff - The New Ideological Divide

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June 28, 2010 – Comments (6)

Despite the apparent deficit-cutting solidarity that emerged from this weekend’s G-20 meeting in Toronto, it is clear that the great powers of the industrialized world have not been this philosophically estranged since the end of the Cold War. Ironically, in this new contest, the former belligerents have switched sides – the capitalists are now the socialists, and vice versa.

We now are witnessing a struggle between two camps that I playfully call the “Stimulators” and the “Austereians.” Both warn that a worldwide depression will ensue if governments now make the wrong choices: the Stimulators say the danger lies in spending too little and the Austereians from spending too much. Each side also has their own economic champion: the Stimulators follow the banner of Nobel Prize-winning economist Paul Krugman, while the Austereians are forming up behind the recently reformed former Fed Chairman Alan Greenspan. (It is cold comfort to witness “The Maestro” belatedly returning to the hard-money positions that characterized his earlier years.) 

Full article

6 Comments – Post Your Own

#1) On June 28, 2010 at 6:05 PM, XMFSinchiruna (27.47) wrote:

great intro ... hope to read the whole piece shortly... thanks for posting.

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#2) On June 29, 2010 at 10:37 AM, JakilaTheHun (99.93) wrote:

Both camps are wrong.

Austerity won't work.  It hasn't work much of anywhere.  It definitely hasn't worked in Ireland:

http://www.nytimes.com/2010/06/29/business/global/29austerity.html

Government spending could theoretically work, but in practice, it's almost always wasteful.  

The real problem is currency distortions, trade deficits, and credit contraction that results from these issues. The best solution is to correct the underlying imbalances.  The next-best solution is to cut income taxes in order to pump more credit into the economy. 

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#3) On June 29, 2010 at 12:01 PM, Gemini846 (48.98) wrote:

In order to cut income taxes, you have to cut spending. Otherwise you just run more deficits.

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#4) On June 29, 2010 at 12:06 PM, Gemini846 (48.98) wrote:

I posted before reading the article, but when the Bush stimulus came around, I paid off debts. When Obama stimulated my paycheck, I bought necessities.

It would be a lot more efficient to give the money to the businesses to pay thier bills, but that would be trickle down. Can't have Obama doing that.

So infusing cash isn't working. Got it.

Austerity sounds pretty good.

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#5) On June 29, 2010 at 12:09 PM, whereaminow (< 20) wrote:

Austerity works quite well when you actually implement it. 

David in Qatar

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#6) On June 29, 2010 at 9:49 PM, curiosityofficer (< 20) wrote:

"Austerity" in this context simply means not spending like a Keynesian, that is, spending in every situation.  This spin is more Keynesian faith healer rubbish.  Their basic argument is that if stimulus happens to work then they're right; when it doesn't, shame on you for doing it wrong.  Keynesian stimulus as a remedy for a balance sheet recession is just idiotic.  

Krugman is the worst of them, good only for ridiculing.

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