Friday, June 11, 2010

Soros says budget deficit cuts will worsen financial crisis

Bloomberg (h/t Scherer):
Billionaire investor George Soros said “we have just entered Act II” of the crisis as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits that may push the global economy back into recession.

“The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”

Soros, 79, said the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak.
It's as if economic collapse is what they have been asking for.  I say this because before the deepest recession in most peoples' memory had even begun to abate -- before most small businesses were able to access loans, before hardly any workers had been rehired --  a peculiar mindset took root in the US and elsewhere.  Suddenly, everywhere you turned, opinion-makers were saying that countries must immediately embark upon massive budget-cutting to reduce the long-term debt risk.   Curbing long-term deficits suddenly became all the rage.  The spectacle has been downright creepy to witness.

The long-term problem of debt is understandable; the impetus toward drastic immediate action on the issue is not.  To the extent "governments are pressured" it needs to be asked: who or what is behind all the haste?

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