Posted by Sada Mosler on August 20th, 2008
There’s nothing credit issues can do to GDP that fiscal policy can’t handle.
Congress has seemingly figured that out and probably the rest of the world as well as evidenced by the new proposed fiscal packages popping up around the world.
Yes, we can lose a bank or two, and lending standards tighten further, but GDP will continue to muddle through even if that means a series of fiscal measures.
And Congress was born to spend; so, they are all over this one.
The only thing that might slow them down is inflation, and so far they’ve seemed to support the Fed trying to step hard on the inflation pedal, rather than ‘tighten’ which presumably helps inflation.
And no one seems to notice the 8000lb bear in the room.
Our response to Russia reminds me of Monty Python’s coconut clapping Arthur trying to intimidate the French defenders of the fort with his credentials.
We threaten them with diplomatic isolation, trade sanctions, etc. as if they care.
They don’t care.
They do care about the new missiles going into Poland.
And we are committed to considering an attack on Poland or any other NATO member as an attack on US soil, as Rice reminded them and even maybe dared them to try something.
We can’t defend anyone against against Russia with our own troops without risking nuclear war.
And Russia will be a lot quicker to that trigger than we will.
And they still have maybe thousands of nuclear warheads aimed our way.
Their next step for Russia is probably to make an offer to the rest of the ex-Soviet Union members they can’t refuse.
Russia sells the Eurozone something like 30% of their oil and gas and can do it at any price they want, and demand any real terms of trade they want.
The risk is we try to draw a line in the sand in some nowhere place over there, and it escalates to where we back down or get involved in lobbing nukes.
I suppose it’s just another case of this administration not seeing the forest for the trees.
We’ve let Russia be reorganized by the ex-KGB leadership that’s a lot smarter than ours, and now we’re paying the price.
Both the inflation and cold war of the 1970s is back, except this time our opposition is far stronger.
There is no even semi-quick supply response to dislodge the Saudis and/or Russians from setting any terms of trade they want.
The Russian consolidation is on the way up supported by a bath of capitalist type riches rather than crumbling under its own weight of a failed socialist economy.
Apart from that, I’m optimistic.