So the OMG-20 confab is over.
And the world leaders have had a chance to reflect on the situation in the Western world's economy.
For the last two years the economic policy of the West has been all about preventing deflation and curing recession by pouring vast amounts of public money into the system in a belief it would ignite a new era of prosperity.
At best the economy of the West has merely muddled along.
Of course this isn't the way it was 'supposed' to play out. Usually 'stimulus' applied after a steep recession leads to a snappy recovery, like it did in 1983-84 after the Reagan tax cuts.
But as I have said on numerous occasions, we still do not fully appreciate the depth, breadth and scope of the 2008 Financial Crisis. A deep economic earthquake has occurred. And the full reprecussions are still not appreciated or understood.
Do you remember when the West started pouring money into this?
Under George W. Bush, Congress was told that a "timely, targeted and temporary" spending program of $150 billion was urgently needed to boost consumer "demand".
When the Democrats assumed control in Congress, they continued with the idea.
And the stimulus produced a slight increase in GDP growth in mid-2008, but it didn't stop the financial panic and second phase of recession.
That lead to the second round of "stimulus". $862 billion worth in February 2009. At the time a pair of White House economists famously promised that this spending would keep the unemployment rate below 8%.
The US jobless rate is still 9.7% and the GDP estimate for first quarter growth has been reduced again, this time to 2.7%.
And what do the Americans want to do now?
Why... more 'stimulus', of course.
The problem is the Western world's Keynesian political consensus is falling apart.
In Europe, the bond vigilantes have attacked the finances of Greece, Portugal and Spain, with Britain and Italy next in line.
Politicians are scrambling away fromt the 'stimulus' mindset to one focused on cutting spending and raise taxes.
Britain has introduced an austerity budget and Germany's Angela Merkel sees vindication for keeping her country's stimulus far more modest than other Western nations.
In America many Republicans and Democrats are rebelling against a third round of stimulus. The original White House package of jobless benefits and aid to the states had to be watered down several times, and the latest version failed again in the Senate late last week.
Some will argue that the world has now reached a Keynesian dead end.
But other's suggest the spending/debt party may have only just begun.
More on that tomorrow...
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