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“He’s got the slows,” said Abraham Lincoln about General George B. McClellan in the fall of 1862. These days, the world’s economy has the slows. Chinese consumers are saving more and spending less. India’s growth rate has fallen dramatically. The same for Brazil.
First quarter growth in the U.S. was just 1.9 percent. Manufacturing output in dropped in virtually all of Europe in May – including Germany. Britain’s contraction was the worst in three years.
Greece. of course, long ago slowed down and went into reverse. The fear is if Alexis S Tsipras wins the election on June 17, he’ll throw a wrench into the economic works.
Financial Times blogster Jean Pisani-Ferry has written: “The relationship between Greece and the rest of the eurozone is increasingly reminiscent of the cold war’s balance of terror. We are of course speaking only of financial terror and Greece is not the Soviet Union, but the mechanics are strikingly similar.
Predictions of doom are popular these days. “The mainstream view [of economists] now reflects more gloom,” Planet Money founder Adam Davidson recently wrote in New York Times Magazine. “The Blue Chip forecast – the average of 50 economic prognosticators – predicts that the United States and world economies will inevitably recover. But the growth won’t necessarily feel like growth – it will be slow, and millions will stay unemployed for many years. The big difference is that in 2006, most were blind to the impending disaster. Now it’s all we can see.”
Back in 1976, Lewis E. Lehrman wrote in Money in the Coming World Order: “Today, national economic policy making is largely concerned with the problems of unemployment and inflation. More precisely, it is their simultaneous combination in nearly all Western economies which preoccupies policy makers. As these problems grow worse, the stakes rise higher. We know that either severe unemployment or sustained inflation, let alone both together, can be expected to have the most serious consequences for liberal democracy.”
There is a cure for the slows. As Lehrman prescribes in the introduction to a new edition of Money and the Coming World Order: “The restoration of a dollar worth its weight in gold provides not only a missing and necessary brake on government spending, but a stable dollar also supplies the missing steering wheel by which to guide efficiently the immense, new savings into long-term productive investment.
Dollar convertibility to gold is the simple, institutional financial reform which terminates the fear of rapid inflation—thus transforming unproductive store-of-value hedges into real investment capital with which to inaugurate a new American era of rapid economic and employment growth.
Someone needs to wake up the world. “We’re not a team, we’re a time bomb,” says the thoughtful Dr. Bruce Banner, whose rage sometimes unfortunately turns him into a green, killing monster called the Hulk. It’s time to diffuse the economic time bomb amongst us.
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