"There's an old axiom that goes, "wise is the person who appreciates candor almost as much as good news." With that as a guide, place the forthcoming decidedly in the category of candor.
Economist Nouriel 'Dr. Doom' Roubini, the New York University professor who four years ago accurately predicted the global financial crisis, said one of economist Karl Marx's critiques of capitalism is playing itself out in the current global financial crisis.
Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.
Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.
Now, in the current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.
'Karl Marx had it right,' Roubini said in an interview with wsj.com. 'At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually rational ... is a self-destructive process.'
Roubini added absent organic, strong GDP growth -- which can increase wages and consumer spending -- what's needed is large fiscal stimulus, agreeing with another high-profile economist, Nobel Prize-winner Paul Krugman, that, in the case of the United States, the $786 billion fiscal stimulus approved by Congress in 2009 was too small to create the aggregate demand necessary to advance the U.S. economic recovery to a self-sustaining expansion.
Absent additional fiscal stimuli, or unexpected strong GDP growth, the only solution is a universal debt restructuring for banks, homes (essentially households/families) and governments, Roubini said. However, no such universal restructuring has occurred, he added.
Without that additional fiscal stimulus, that lack of restructuring has led to 'zombie houses, zombie banks and zombie governments,' he said."
Read the International Business Times,
Nouriel 'Dr. Doom' Roubini: 'Karl Marx Was Right'.
But
as discussed in the past,
Republi-CON zombie ideas live on.
P.S. He also predicts that the global economic crisis will cause more social unrest and "absent a return to the right balance between markets and public goods, conditions are likely to get substantially worse. . .
The Tea Party, and other conservatives are, by-and-large, in addition to their opposition to more, short-term fiscal stimulus, also opposed to vital investments in human capital, skills, and the social safety net to increase productivity that enable workers to compete, be flexible, and thrive in a global economy."
Read the International Business Times,
NYU's Nouriel 'Dr. Doom' Roubini-Social Unrest Will Spread.
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