Saturday, August 15, 2009

Love that recession

The Wall Street Journal reported a day or two ago that France and Germany, the motors for Europe, are coming out of the recession. According to a piece by Rick Moran in the American Thinker, they are not alone: China and India are recovering as well. Among the most developed economies, only the United Kingdom and the United States are lagging behind.

Some of this is probably due to the huge overhang of U.S. consumer debt; Americans today are paying down their debts before running out to buy new stuff. This is an essential correction, but in the short term it means that consumer spending won't boost a recovery.

However, government policies also make a big difference. If you remember, France and Germany resisted pressure from President Obama and from the UK government to increase deficit spending. They argued that creating more government debt was not the answer - and looks like they were right.

Nor did either of these governments jump with both feet into the business of saving some big corporations by taking them over, while letting others fail. Nor has either of them, to the best of my knowledge, appointed a 'salaries czar' to decree how much corporate executives deserve. If you want to write a primer on how to destabilize an economy, be sure to include these techniques.

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