Friday, June 1, 2012

Necessary Stupidity

Necessary Stupidity

An example of the necessary stupidity described by Orwell in the early 40’s, in play today:
Investors could revolt at a moment’s notice against high government deficit levels, jeopardizing chances at a recovery and potentially sending interest rates soaring, former Federal Reserve Chairman Alan Greenspan told CNBC.
The simple question he fails to ask himself is this: what would that revolt look like? Presumably these revolting investors would sell the bonds. But then what would they put their money into? If they are selling in fear, it is because they fear inflation, so they won’t choose to hold Dollars. The only realistic option then would that they would revolt by choosing to put their money into real goods and services.

Essentially what Greenspan is saying is “we must be careful, if we keep borrowing, investors might choose to gasp redirect their money into the real economy, employing people and putting our idle factories to use. The horror.”

This is the level of reasoning that one needs to stoop to in order to justify austerity and hard money.

Orwell lives.

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