by Jhon Mauldin
source
www.businessinsider.com
"Concern about politics and the processes of international co-operation
is warranted but the best one can hope for from politics in any country
is that it will drive rational responses to serious problems. If there
is no consensus on the causes or solutions to serious problems, it is
unreasonable to ask a political system to implement forceful actions in a
sustained way. Unfortunately, this is to an important extent the case
with respect to current economic difficulties, especially in the
industrial world.
"
While there is agreement on the need for more growth and job
creation in the short run and on containing the accumulation of debt in
the long run, there are deep differences of opinion both within and
across countries as to how this can be accomplished.
What might be labelled the 'orthodox
view' attributes much of our current difficulty to excess borrowing by
the public and private sectors, emphasises the need to contain debt,
puts a premium on credibly austere fiscal and monetary policies, and
stresses the need for long-term structural measures rather than
short-term demand-oriented steps to promote growth.
"The alternative 'demand support view'
also recognises the need to contain debt accumulation and avoid high
inflation, but it pushes for steps to increase demand in the short run
as a means of jump-starting economic growth and setting off a virtuous
circle in which income growth, job creation and financial strengthening
are mutually reinforcing. International economic dialogue has vacillated
between these two viewpoints in recent years."
– Lawrence Summers, The Financial Times, October 14, 2012
