Rethinking Austerity

The Powers That Be are now facing the abyss (To borrow from the wizened old stock broker in “Wall Street”).

Christine Lagarde this weekend warning of a downward spiral and now Bill Gross urging the UK govt to soften its austerity

Gross, the world’s bond king made a seriously wrong bet that the deficits would cause a rise in interest rates, and so famously exited Treasuries recently, when in fact rates have plunged due to fears of another financial crisis and return to recession. He recently admitted his error.

More to the point he and Lagarde are suggesting more stimulus from the US — something that Obama will likely offer this week.

The question is whether the Tea Party Republicans or the stubborn Germans will listen to this Keynesian advice. If not, back to the liquidationist policies of Mellon.

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