"STIMULUS JUNKIES" UNABLE TO FACE THE NEW ECONOMIC REALITY: THE MUSIC HAS STOPPED!!

Stephen D. King, When the Money Runs Out: The End of Western Affluence (New Haven & London: Yale U. Press, 2013) ("For the most part, monetary and fiscal policies have, rightly, been regarded as the equivalent of drugs designed to fix the underlying problem. Interest rate cuts are normally temporary--what comes down eventually goes back up again. Big budget deficits designed to kick-start an economy automatically recede as the subsequent economic recovery tops up tax revenues and reduces social expenditures. Just like a course of antibiotics, economic stimulus is only needed for so long. The economic patient eventually makes a full recovery." "Even when recovery isn't complete, it doesn't mean to say the policy drugs hasn't worked. The recession that followed the failure of Lehman Brothers in2008 was bad enough but it could have been a lot worse, The policy stimulus on offer was far greater than anything provided by the Great Depression and, thankfully, the economic outcome was--partly as a consequence--a lot better. The overall peak-to-trough decline in US national income, for example, was 5.1 per cent compared with a whipping 30 per cent or so during the Depression" "Yet we're not satisfied with this 'success'. That things could have been a lot worse is not the kind of argument that wins votes. We have hopes, aspirations and entitlements that need to be met. Stagnation, understandably, isn't good enough. We'd rather hear that economic recovery is just around the corner, And we'll happily believe anyone who can, apparently, lead us to the Promised Land. In the process, we have become addicted to policy-making drugs. We're no longer sure, however, whether they're really doing us any good. Yes, they may be hiding the pain but, in a world of excessive debts and aggressive deleveraging, is there any evidence that policy drugs are fostering lasting economic recovery?" Id. at 69-70. "There is much to be gained from economic and political history: it is such a shame that so little of it is taught to budding economists working their way through their university degrees. History may not repeat itself but it is a brilliant way of highlighting issues that modern-day economists have, foolishly, brushed to one side. And it offers a sobering reminder of risks associated with enduring economic disappointment: inequality, nationalism, racism, revolution and warfare are, it seems, the 'default' settings when economies persistently fail to deliver the goods." "Put simply, our societies are not geared for a world of very low growth, Our attachment to the Enlightenment idea of ongoing progress--a reflection of persistent post-war economic success--has left us with little knowledge or understanding of worlds in which rising prosperity is no longer guaranteed." Id. at 5-6.).