By Jordan Roy-Byrne
Today’s credit stress is primarily with governments. The stress and liquidation from the private sector dominated dominated the landscape in 2007 and 2008. Governments have absorbed many of those losses and now it is the credit quality and creditworthiness of governments that is come into question
Perhaps it is my mistake to think that government can repair itself. From the looks of it, this may not be the thing that happens. This government could, in my opinion, repair itself. But it doesn't have the will to do that. Nor does the public seem interested enough to scare the politicians into doing the right thing and actually fix this mess.
The cuts necessary to bring the budget back into historical norms are not out of the question. What is needed is new priorities. Unfortunately, these new priorities are not particularly helpful to certain politicians, so the interest just isn't there.
Number one priority should be to restore fiscal integrity. All other considerations should yield. Without a sound financial structure, none of this is going to matter. Eventually, if the current trajectory holds, all of what the politicians are trying to protect will break down anyway and chaos will ensue.
Number two priority should be to restore growth. This will enable debts to be serviced and we can grow out of the problem. But certain politicians are not particularly fond of growth. The choice is simple, replace the politicians who wish to hinder growth.
It won't be easy and it may well be impossible if the realities of the situation are not faced. The one reality that must be faced is that something has to give. The thing that animates the left is Keynesianism. This has shown itself to be a failure. They must give that up and/or be sent packing. Otherwise, we face a dark future.
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