Some instructive comments from Martin Wolf in a recent interview:
U.S. debt ceiling impasse threatened the world with financial and economic Armageddon.
U.S. economy is clearly suffering from a shortage of aggregate demand; government as spender of last resort should be spending, but legislators appear to want a bad economic situation in 2012 for political purposes.
U.S. is on track for fiscal tightening in 2012 and 2013 that is guaranteed to be contractionary, which may have a recessionary impact here and abroad.
A sampling of the more reactionary viewer comments is telling. As a stubborn independent who makes plenty of room for others' political views, I normally don't like to cast aspersions; but it looks like right wing media and certain Austro-libertarian outlets have now accomplished what they set out to do long ago (which in my more cynical moments I view as 'catching up on the dumbing down'). The left has always had its share of acrimonious, misinformed 'haters,' but the hyperbole and ignorance being displayed on the right are astounding. They embody a defective caricature of the liberty and free trade legacies of Milton Friedman, Hayek and Mises, Reagan/Thatcher and the rest, similar perhaps to what the left had previously done to Keynes and Progressivism.
Government at all levels can be an instrument for good and bad, waste and productive activity, justice and injustice; the same is true for all private sector entities, including individuals. But the meme that government, or one political party and its philosophical leanings, is always and everywhere the enemy is absolutely out of control. And caveat emptor—while such ideas have value, for example, to: (1) people or groups seeking to increase or protect their personal, political, social, or economic power, or (2) followers who are seeking scapegoats, easy answers to complex questions, or merely stronger feelings of self-worth and superiority, they offer little social value at a time when it is sorely needed, and little long-term value to the true believers.
This is one reason why we're not terribly optimistic that policymakers will right the ship any time soon: the U.S. political landscape is so brimming with acrimony and misinformation that it is a severe challenge to even agree on the problems, much less implement anything constructive to address them. From an investment perspective, that should be a recipe for continued volatility.
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