• Nicely done. It would be even better if it would entail governments running surpluses in the “good” times when running deficits in the business cycle recessions. You see, the Boston example was just working because it shifted the wall further to the future by shifting debt to a bigger entity..
    Governments running even more deficits in recessions and never pay it down with surpluses still makes people pay who had nothing to do with the debts in the first place.
    Sad to hear economists who seem to grasp what is going on still denying that permanent government debt is exactly the same thing as; “the bill for more and more individual and institutional debt is being past on to the people who had nothing to do with the debts in the first place”. Debt spending is not “from the future”, it comes from the people paying the “bill” in the form of devalued currency right now. They should get it back with paying off, or defaulting (!) the debt..
    Ignoring this is just as dishonest as the “debt owed to our selves” phrase.
    My 2cts but who is listening eh.

  • that animation / drawing sequence is priceless, i don’t know how good an economist David McWilliams is but he is a gennius of drawing and presentation – I don’t know how many people were involved in making this animated “lecture” but what they’ve got is a masterpiece.

    This said I cannot agree fully with the idea that government spending (or austerity as its opposite) or decreasing or increasing the supply of money would solve the current crisis, otherwise Bangladesh would have printed all the money it wished in the world and quickly surpassed the United States. I am convinced that the usury driven/banking economy that replaced Europe’s manufacturing and honest agricultural economy while led to a boost in consumption (of imported mainly Asian merchandise and other goodies like unlimited quantity of fossil fuels) is unsustainable. Europe will lose its industrial base and its social cohesion – the solutions to Europe’s problem are not monetary , you cannot just forgive debt to get more debt again while producing non-competitive stuff in best cases or nothing at all / what is needed is a change of direction that would involve a number of steps which are at this time unacceptable to ideologically motivated elite of the EU, after all the EU in its present form is an ideological project that is bound to failure like other mega ideological ventures and I for one would be happy to see the Evil Union collapse.

  • Hello Yanis, I like listening to you on Doug Henwood’s show. I made a mistake posting my comment, I meant it as a comment on the video, not a reply to Mich. Can you fix that if you publish it?

  • Brilliant. There is however a huge elephant lurking in the corner of the room. In order to avoid the debt trap of austerity=reduced GDP=reduced income=less ability to pay debt, the Merkel/Sarkozy idea is that growth will offset reductrions in GDP caused by austerity. But growth is not and will not be forthcoming first because without a stimulus it won’t get off the ground and second because post war growth has been driven by the availability of cheap energy, in particular oil. The era of cheap oil is over. It and other resources (food for example) are in shorter supply and are subject to greater demand. The way forward is not the way we have travelled so far. There will not be a business as usual return to “normality”. Dare I say it, perhaps Greece is fortunate in that it is being given a head start in the race to discover how we can live in a world without economic growth.

  • Yanis, maybe i’m missing something here, because I agree with assessment made in this video, but isn’t the problem the private sector balance sheet impairment first and foremost? Isn’t this what is causing the “Paradox of thrift?” We are told that governments should expand their balance sheet as the private sector is writing down debt, but wouldn’t it make more sense to either forgive and/or default on debts? I’m not saying a disorderly default, but one managed as effectively as possible so as to allow the private sector to begin investing their savings again instead of working to pay down their debts in a futile deflation.

    Maybe i’m too cynical, but after seeing what governments do with the money they are given or the money that they borrow on our behalf, how can we expect them to solve our economic problems through deficit spending?

    Again, I go back to the debt. Writing down/forgiving the debt is the best option in my view, but hey, i’m always open to being wrong.

  • Great video.

    @Robert Collins: “In order to avoid the debt trap of austerity=reduced GDP=reduced income=less ability to pay debt, the Merkel/Sarkozy idea is that growth will offset reductrions in GDP caused by austerity”.

    We had a beautiful example of how well this works here in the UK, in the latest employment figures. The idea the Wise Men are telling us is that austerity in the public sector will somehow magically make the private sector flourish.

    Net jobs lost in the public sector, in one month: 67,000.
    Net jobs created in the private sector over the same month: ….er…… 5,000.

    nuff said.

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