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World leaders walk economic tightrope

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They're actually thinking about raising taxes at a time like this? The deficits need to be reduced, but if you strip away growth you're just going to create new ways to lose money in the future....then you'll need more cuts in order to keep your budget in line once again. I hope Europe isn't just putting all of their hopes on the American consumer to create their growth for them, but it looks like that might be the case.

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It is very simple. The world's economic problems are caused by excessive amounts of debt (money) being created by banks, which was then poured into unproductive, unsustainable, and often destructive activities. Was going on at least 25 years until the system broke down and the amount of speculative debt stopped growing and the bubble burst. Government deficits are in large part due to the money spent on attempting to rescue the now bankrupt banks and avoid a collapse of the system, and government spending on programs makes up only a percentage of the deficit. Some of that spending might be wasteful, but that is a separate issue and completely irrelevant to the main problem. "Austerity" is nothing more than a tax on the public used to subsidize banks.

Not sure which is worse, the idea that world leaders are ignorant of all this with their brains full of junk economic theories, or they aren't ignorant and just pretending to be.

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GJDailleult, that's not a bad summary. I'd like to add that many of these world leaders - a very loose definition of them - are damned if they do and damned if they don't. They'll need to borrow even more, hike taxes to unpalatable levels or print money to reduce these debts, none of which are economically feasible due to even deeper deficits, electoral revolt or likely inflation.

And there is now way governments are going to allow large-scale bank failures. Sure, a few here and there are acceptable, but the real power-brokers such as Goldman Sachs, JP Morgan and the like will never be allowed to crash. They pull the strings. Not sure about most of the central banks, but if Obama tried to cut the Fed out of the picture and create interest-free debt as the national currency instead of the scam run by the Fed, this would go a long way towards reducing the crippling and ever-expanding interest bill the US govt is accruing while trying to pump-prime the economy with public funds.

But that would likely get him dumped or suicided...

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We are going the wrong way. We can substantially cut our deficits and budgets by going the right direction. We can "retire" by creating a garden paradise lifestyle that solves the world problems we created with the enslaving "employment most of our life" lifestyle. Turning back to the land solves the energy crisis, reoccurring financial crises, climate change-global warming fears, war, immigration, crime, pollution of our air, land, water and food making us diseased, young and old, inequality and social welfare programs with the one strategy. It is the only sustainable development.

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I'll add that the deficits are also caused by the increased cost to govt. (ie. employment insurance) and lost tax revenue caused by the deflation of the money supply and the fall in GDP that goes with it. That happens whether the government uses stimulus spending or not.

Eccoman, agree with your points. It is a catch-22, and what has been going on in Japan for 20 years. Every time Japan has tried to cut down on the deficit and debt, the economy slowed down so much that they were worse off than where they started. That is what happens in debt deflation, but then mainstream economics doesn't pay any attention to the concept in the first place. Doesn't pay any attention to the ideas of market instability, or the difference between financial and productive wealth either, because if they did it would mean that all post-war economic theory is a fraud, designed to enrich you-know-who.

Anyways, always amazed how few responses these kinds of articles get here and on other general interest websites, compared to economics or business sites. This is the real issue, not shouting about socialism and taxes etc. But it is the general lack of understanding that allows things to continue, most people just can't grasp just how REALLY badly screwed up things are.

Would also be interesting to know how much of the public debt in the USA and other countries is due to the money creation system. All money carries an interest charge, would we even be having this deficit problem if we weren't still using this medieval system in the 21st century.

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"Austerity" is nothing more than a tax on the public used to subsidize banks.

Well, to be fair, first world nations were already having budget problems with the health care costs, pensions, etc, long before the banks came into play.

Anyways, always amazed how few responses these kinds of articles get here and on other general interest websites, compared to economics or business sites. This is the real issue, not shouting about socialism and taxes etc. But it is the general lack of understanding that allows things to continue, most people just can't grasp just how REALLY badly screwed up things are.

It's a topic of interest just like any other. I'm guessing you spend your time researching it because it's interesting to you. I have some interest so I do some reading, but not as much as other areas.

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