''Return to Normalcy: The False Argument of "Austerity" vs. Growth''

From Institutional Risk Analyst


''But framing the discussion between austerity and stimulus is a canard that has enveloped economists, commentators, and policymakers in a collective delusion. There is no more "normal." Significant economic growth -- akin to the rates seen in the developing world since World War II and particularly since the 1980s -- is something of the past. Over the past three decades, the United States' growing economy was a function of falling interest rates and increasing fiscal deficits. Both tendencies fueled global commerce. But depending on your view of inflation, the intrinsic growth possible in the major economies going forward is likely to be nominal, at best. Existing debt, unfavorable demographics, and lacking political will to raise taxes will keep G-20 economies from returning to the happy days of economic growth above the expansion of working age populations.



The key question facing the global community is how to manage the transition to a less robust, but also less volatile period of growth without sliding into another world war. A true solution will have to involve not only governments reducing public debt, but also restructuring insolvent industries to fuel real, sustainable growth.''

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