Nations should spend more to make more
In Berlin on May 26, Geithner told European leaders to follow China’s lead to boost economic growth since the United States is no longer capable of carrying the weight of the global economy.
“The statement that the United States is no longer capable of carrying the global economy exposes a deeply flawed understanding of our economy and our monetary system,” said Mike Norman, chief economist at John Thomas Financial.
The US government is structured to be able to spend as is needed, which gives it an advantage to aid in the nation’s monetary growth.
“We have the means in our hands to lift this economy, not only our economy back up, but the global economy, be the engine of global economic leadership as we once where,” said Norman.
Norman said the current economic belief system in America that leads some to believe we are running out of money is to blame the lack of economic growth.
“The most bizarre thing of all is that we have our treasury secretary telling China to do exactly what we should be doing right now. Therefore, we are actually ceding the mantle of economic leadership over to the People’s Republic of China,” said Norman.
Many are arguing that the free market system is on its way out and state capitalism like that of China is the wave of the future. Norman, however, said that the notion of free market is a fallacy and that the United States is an industrial state that was never completely a free and open competitive market.
“The idea that the free market is now going away really misses the point,” said Norman.
World leaders need to focus less on spending cuts, national deficits and austerity measures because they are likely to create a deflationary environment and further hinder the global economy.
“We really need another stimulus, but politically I don’t think that’s something that’s acceptable right now. So, unfortunately what I see maybe for the next six months or a year, perhaps longer, is that many more people are going to have to suffer for no particularly good reason until we realize that austerity is not the road to prosperity,” said Norman.
Norman argues that the belief that governments are limited in what they can spend is outdated and that spending more can make nations richer.
“We’re sitting back not utilizing the capital, both the physical capital and the human capital, that we have and that’s a terrible shame,” said Norman.
Investigative journalist Webster Tarpley says it is the country's flawed financial system that is to blame.
“The US economy, to the extent that we still have one, is based on the New Deal model, which is a highly regulated kind of industrial capitalism and this is what we had started in 1933,” he said. “Now, for the past 40 years, since the coming of Nixon, more or less, reactionary Republican administrations have been steadily dismantling that entire edifice and now we’ve got no more regulation and we’ve got no more industry.”