Be Pragmatic

The Bloomberg interview with John Taylor that I have embedded at the end of my blog today impressed me. He is very pragmatic about the situation we are in. I think that too many people expect the impossible. Germany seems to be in a particularly tough spot. To paraphrase Taylor, Germany needs to stop selling Mercedes to people by loaning them money to buy them. It is worse to make the Mercedes, and never get paid for it, than to not make the Mercedes at all. Germany is just starting to understand this, and they are not happy.

Taylor also used a baseball analogy for the Euro crisis. "We are only in the second or third inning," he said. I agree. This is why I have been calling this period the Great Recession. I did not invent the term of course, but I think that it may be more than a decade before things return to normal—or we adjust to what some are calling the new normal.

Things will slow down next year, no matter who is elected. But this is not the crisis I have been predicting. I am still hopeful we can avoid the crisis, or in any event minimize it with proper action: a combination of large spending cuts, tax increases, and quantitative easing (the Federal Reserve buying government debt).

Maybe like the Germans, I too am believing the impossible. Am I the economic equivalent of a televangelist? I hope not.