LOOKING AHEAD - THE VIEW IS BLEAK

Economic orthodoxy will be the death of us yet. I watched, with waning interest, the “interview” with Ben Bernanke on “60 Minutes.” As the interview droned on I felt less and less secure. In the Times this morning this quote: Mr. Bernanke also said that the Fed was prepared to buy even more than $600 billion in Treasury bonds over the next eight months, if necessary, to increase economic growth.”

The key words here are: “increase economic growth.” The Fed, Bernanke claims, is not printing money but spending reserves. (If you’ve come this far, try to stay with me while I blunder through the logic of his statement.)

Buying treasury bills puts pressure on long term interest rates. That means that corporations or banks looking to expand using long term debt will be burdened with lower interest rates. But wait. Don’t we already have the image of major companies fattening their balance sheets by borrowing at rock-bottom rates to decrease their existing debt? The bottom line certainly does look better. But can someone please explain to me why that will increase economic activity. The major corporations and ”investors” (speculators) are raking in millions as the stock market continues to boom and unemployment rates go up and despair rises and the Republicans want the rich to get even richer. I give up!

Applying orthodox economic principles is not working. The fight to keep the deficit low is meaningless. The deficit is a paper tiger. Once again, I believe that only government intervention to put people to work will change the present gloomy outlook. America cannot sit and wait for corporations to start hiring when people are not spending and companies are not going to increase production in a falling market. I don’t blame them. If I ran a corporation I would leave altruism at the door, or out in the hall, or as far away as possible.

There is an ideological stand-off, made worse by the recalcitrant Republicans and the woefully weak President. There is so much to be done in America. (And if it is done in America it will reflect on Canada.) There is so much infrastructure that needs updating. There are public works projects crying for help. Do we believe that major corporations and banks are going to put up the money for these projects? They won’t. They shouldn’t. And with taxes staying low, increased government revenues aren't there to do it either.

Stuck. They are stuck between the rock of orthodox market-place economics and the hard place of falling employment and consumer demand. They’re waiting. For what? The tooth fairy?