On Oct 22, 2010, at 9:59 AM, Wojtek S wrote:
> Doug: "Even the neolibs would be very uncomfortable with unemployment
> stuck around 10% - not to mention drifting higher."
>
> [WS:] So why are they pushing for policies that will have that
> effect? I do not think they are stupid, I think they know the risks
> but go ahead anyway (UK is the prime example.) Why? Is it the
> Russian roulette player's mentality (I may die, but if I do not, I may
> win big time?)
I really can't figure this out. As far as I can tell, pressure for austerity isn't coming from either the economists or senior execs at the big investment banks. You have small fry like Schiff shouting for blood, but that's not what the big boys are saying. My guess is that they really don't believe that fiscal retrenchment causes deep recessions. They can live happily with moderately high unemployment, say around 7% in the U.S., but 10% is not something they're looking for over the long term. You can see it in the Fed's QE policy - they're nervous about this being a new equilibrium. We can also go on about plutocracy, but even so, anyone who has to face voters is going to have a hard time doing so if he or she is blamed for 10% and rising, or even 10% and stable.
Doug