“The
cat is up the tree these last five years and we still haven't gotten
it down yet” is a sentiment expressed at an economic forum recently
regarding the status of the global economy. Some argue for increased
spending to generate demand, increase growth and thereby reduce debt
with greater tax receipts. I am not convinced this would work
without careful expenditure since mal-investment is a waste that
exacerbates the economic malaise with more debt and little
compensating economic growth.
Japan's
infrastructure spend of twenty years ago did nothing to turn around
their current economic malaise now entering it's third decade. It's
malinvestment in nuclear utilities caused by ineptitude in preparing
for the inevitable tsunami has doomed Japan for more decades of
decline as they have to mothball some facilities and dismantle and
detox others. In both cases the return on investment is negative but
the later is extremely so.
With
American real estate clearing up and the war expense in Afghanistan
and Iraq winding down the economy is getting a gentle breeze behind
it. A good case could be made for the stalemate in Congress being a
good thing.
Scandinavia
is an example of governments actually seeking value for expenditures.
Sweden was in bad shape in the nineties and today it is doing great.
They may be socialists but they are extremely practical. No hand
wringing on their part when it came to not saving Saab, a car company
which I am sure many Swedes were proud of and in a country such as
France would have been saved by the government in charge in a
heartbeat. Didn't I blog earlier about the Sweden taking on Milton
Friedman's school voucher system?
My
final point is that global banks are the great cake eaters in the
system. The greater the percentage of global GDP from assets badly
allocated by whales gone wild the longer it will take for the cat to
back down to the ground.
