She pretty much said it all in the title of her op-ed on Bloomberg. But there’s more:
Ten years and $8.35 trillion later, what do we have to show for this decade of deficit spending? A glut of unoccupied homes, unemployment exceeding 9 percent, a stalled economy and a huge mountain of debt. Real gross domestic product growth averaged 1.6 percent from the first quarter of 2001 through the second quarter of 2011.
And that about sums things up.
The stock market sell-off is generally being attributed to the feckless leadership in Washington, Europe and Japan. It’s usually impossible to know for sure what causes a herd to stampede–was it the lion cresting the butte over the savannah upon which they grazed, or perhaps an ill breeze carrying portent of an impending calamity?
It’s probably stretching credulity to ask one to consider the notion that perhaps the markets are finally catching wind of the fundamental reality that there is nothing governments can do to engineer sustainable growth in these old and dying economies. Keynes is dead, not because his prescriptions don’t work (they don’t, but that’s a different matter), but because the paradigm upon which they were founded no longer exists. Economies can’t grow their way out of deficit spending when the individuals and households comprising them are aging and dying, and in the process consuming more value than they create. Keynes, and all neo-classical political economists, including Monetarists (which practice a form of Keynesianism, and whose high priests run the Federal Reserve), founded their prescriptions for healthy economies upon the assumption that the populations comprising them will ceaselessly grow. This is obviously not the case.
There’s really no way to know whether the ten percent or so “correction” in the markets is over for now, or still has legs. The way down will not be smooth. But if the stock markets of these economic systems reflect the underlying economic fundamentals of each, then the abiding direction is down, and all the king’s horses and all the king’s men are powerless to change the trajectory again.