U.N. warns of risks of global austerity – In euro zone, banking fear feeds on itself
By NEIL MacFARQUHAR
6 September 2011 UNITED NATIONS — The global economy faces a decade-long stagnation because governments are pursuing deficit cuts and other austerity measures rather than providing the needed stimulus packages, said a United Nations economic report released Tuesday. Instead of new regulation of the financial system to address the problems that helped bring on the recession in 2007-8, governments in the United States and Europe are trying to woo the very speculators who helped cause the problem, said the report by the Geneva-based United Nations Conference on Trade and Development, which is known by its acronym, UNCTAD. “Those who support fiscal tightening argue that it is indispensable for restoring the confidence of financial markets, which is perceived as key to economic recovery,” the report said. “This is despite the almost universal recognition that the crisis was the result of financial market failure in the first place.” The report criticized the austerity measures as producing results exactly opposite their intended effect. “Making balanced budgets or low public debt an end in itself,” the report said, “can be detrimental to achieving other goals of economic policy, namely high employment and socially acceptable income distribution.” The report said Western governments should instead be more strictly regulating financial markets, promoting wage increases that will stimulate spending and returning to managed exchange rates and other measures that decrease speculation. “Domestic consumption remains weak owing to persistently high unemployment and slow or stagnant wage growth,” said the report. […]
U.N. Body Warns of Risks of Global Austerity 
By LANDON THOMAS Jr. and NELSON D. SCHWARTZ
6 September 2011 Remember the collapse of Lehman Brothers? Europeans certainly do. As Europe struggles to contain its government debt crisis, the greatest fear is that one of the Continent’s major banks may fail, setting off a financial panic like the one sparked by Lehman’s bankruptcy in September 2008. European policy makers, determined to avoid such a catastrophe, are prepared to use hundreds of billions of euros of bailout money to prevent any major bank from failing. But questions continue to mount about the ability of Europe’s banks to ride out the crisis, as some are having a harder time securing loans needed for daily operations. American financial institutions, seeking to inoculate themselves from the growing risks, are increasingly wary of making new short-term loans in some cases and are pulling back from doing business with their European counterparts — moves that could exacerbate the funding problems of European banks. Similar withdrawals, on a much larger scale, forced Lehman into bankruptcy, as banks, hedge funds and others took steps to shield their own interests even though it helped set in motion the broader market crisis. Turmoil in Europe could quickly spread across the Atlantic because of the intertwined nature of the global financial system. In addition, it could further damage the already struggling economies elsewhere. “This crisis has the potential to be a lot worse than Lehman Brothers,” said George Soros, the hedge fund investor, citing the lack of an authoritative pan-European body to handle a banking crisis of this severity. “That is why the problem is so serious. You need a crisis to create the political will for Europe to create such an authority, but there is still no understanding as to what the authority will do.” The growing nervousness was reflected in financial markets Tuesday, with stocks in the United States and Europe falling 1 percent and European bank stocks falling 5 percent or more after steep drops in recent weeks. European bank shares are now at their lowest point since March 2009, when the global banking system was still shaky following Lehman’s collapse. Investors also continued to seek the safety of United States Treasury bonds, as yields on 10-year bonds briefly touched 1.90 percent, the lowest ever, before closing at 1.98 percent. […]
"The global economy faces a decade-long stagnation because governments are pursuing deficit cuts and other austerity measures rather than providing the needed stimulus packages,"
Bullpucky. The notion that unlimited growth can last indefinitely is based on pure idiocy.
Unlimited growth is a bad idea. Constant expansion of global control, resource extraction, corporate growth, government growth, population growth is the path to self-destruction.
This should be dead obvious. The reason why we are in trouble now is because of unchecked growth. The unlimited growth model being followed by the world's economies has both natural and human limitations built-in. It is quite clear we cannot manage what we have today efficiently, economically or with wise stewardship, more growth will only make these problems significantly worse.
Economist have a very poor understanding of "limits" that are inherent in any economic model. The notion of a "finite world" is lost on them.
We need austerity measures now because of this endless pursuit of economic growth, which has sacrificed everything else, and now we have to clear up the mess that has been made.