Friday’s jobs report triggered a precipitous drop in the US markets with the Dow Jones dropping 275 points to near 12,000, culminating a series of loses that has the Dow Jones losing all the gains made in 2012.
Right now the Asian markets are “melting” down (1-1/2%-2%)as well, raising concern for the US markets’ opening Monday morning. There is talk of QE3 in light of this “Second Great Recession” that would be set off by Europe this time around.
Last night, CNBC’s “Markets in Turmoil” warned everyone not to panic, yet “there is cause for great concern”.
There is disunity in Europe in handling the crisis. Two opposing approaches are center to the economic debate- stimulate ‘growth’ by various means, or impose austerity measures which means cutting back on government spending.
Stimulus spending to promote growth is termed Keynesian Economics. It is found to be substantially flawed, if not detrimental to an economy.
Considering Europe is predominately socialist, it’s no surprise that so many of its leaders continue to call for no decrease in spending, even in the face of a collapse of their economies—after all, “the goal of socialism is communism”. These European socialists decry austerity cut backs as severe and un-necessary, calling for ‘growth’ measures instead. While they may not be “stimulating” the economy with further Keynesian stimulus, they offer nothing to reduce the current rate of spending—a sure recipe for disaster.
Controlling government spending is the holy grail to creating overall prosperity, and that is best achieved by government frugality– not merely “hoping for growth” without substantial austerity and tax cuts.
One only has to go to Scott Walker in Wisconsin to illustrate the effectiveness of austerity verses overspending. Walker fought against big labor’s efforts to halt austerity and has produced a budget surplus without raising taxes, an improved business environment, and a corresponding increase in jobs and overall tax revenue.
A European economic collapse could potentially cause a corresponding US collapse as many US banks hold extensive amounts of European debt. As a result, this would prompt another call for a “global currency”—the United Nations, including China and Russia, have already called for it in 2009.
Europe’s downward spiral and it’s adverse affect on world markets seems inevitable. If excessive debt and Keynesian Economics are enemies of capitalism, they are dear friends of socialism and communism. And, when socialism succeeds in collapsing “evil capitalism”, full-fledged communists would no doubt sweep in to “save the day”.
Then the Left would have achieved the ultimate in “fairness”—for in pure communism, everyone owns the same amount of wealth—none, as the government owns it all.