US Hypocrisy In Toronto

Remember back nine years ago, in the wake of the 9/11 attacks on the United States, when then-Fed chairman Alan Greenspan began to hold rates down to assist US economic recovery?

Only shortly after the bursting of the late-1990s technology sector bubble, Greenspan began pumping liquidity into the US economy again.

The result, as we came to realize by mid-2007, was a housing finance disaster of epic proportions. Too much borrowing and securitizing of loans to unfit, un- or marginally-qualified buyers.

In short, for the past decade, the US's economic troubles have largely been due to borrowing and spending money which did not really exist. It was borrowed or printed, rather than saved in advance.
Now we turn to the recent Toronto G-20 summit. Having infected the world's economies with debt instruments of questionable quality, the US is now lecturing the other nations to join it in another borrowing, printing and spending spree.

Our delegation pressed more cautious European leaders to throw caution to the wind and enact even more stimulus programs in their own economies.

I purposely didn't watch any summit-closing grandstanding speeches, but I'm fairly optimistic that the European leaders held firm. Perhaps the US Congress' defeat of the latest Democratic stimulus bill added stiffening to their collective spines.

Judging from the joint statement's alleged compromise on making growth a primary concern, but extracting a promise on deficit reduction over the next few years, I'd say the Europeans managed to subdue our own out of control federal representatives to the meeting.

How long must the US economy endure more silly, impractical, expensive and pointless Keynesian spending? When will the US government finally realize that the only lasting, valuable spending in an economy is by the private sector, which creates private sector jobs.

All federal spending must borrow or tax, now or later, thus diminishing private capital and savings. Government spending is always politically motivated, not economically driven.

It makes no sense to believe that excessive government spending will create lasting employment or economic activity. If that were so, endless deficits would be a good thing. But they aren't.

Perhaps now that the Toronto summit is finished, and no major economic events are scheduled before the US November Congressional elections, excessive spending will abate, and, then, if there is a change in party leadership in at least one House of Congress, be stopped for the next two years.

We can only hope.