Monday, 6 October 2014
Martin Wolf backs Wall St not Main St.
In this article in the Financial Times yesterday, under the sub-heading “Keeping zombies alive” he refers to the fact that QE saved some uneconomic banks and other financial firms from bankruptcy. Plus he says that criticism of those attempts to keep lame ducks alive “amounts to demanding still deeper depressions”.
Well excuse me, but shoveling money into the financial sector is ONE WAY of minimising a depression, but if that involves “keeping zombies alive”, it’s not a very GOOD WAY of doing so.
If one sector of the economy has over extended itself, it needs to contract: a few bankruptcies are in order. Obviously that will have a bit of a depression inducing effect. But that undesirable effect can be minimised by GENERAL STIMULATORY MEASURES: to put it bluntly, feeding money into Main Street.
But of course millionaire bankster / criminals devoted huge amounts of money and effort to persuading / bribing politicians into channelling money to Wall Street and the City of London rather than to Main Street. And that persuasion / bribery works for the most part.
No doubt keeping zombies alive is a QUICKER way of escaping a depression than closing down uneconomic firms and re-allocating the relevant labour, land, etc. In the SHORT TERM, the British government doubtless managed to stop unemployment rising in the Midlands by keeping British Leyland alive for a few years. But LONG TERM, there is no question but the best option is to let zombies die and apply as much general stimulus as possible with a view to stopping unemployment rising too far.