World Leaders Pledge To Cut Deficits; Can They?
At the Group of 20 Summit in Toronto days ago, the countries participating left with one common goal; to reduce the deficits in each country while not promoting that people hold onto their money and to spend it instead.
It’s an interesting prospect, one that needs to be examined because of its unique scope. The economy has been jittery since 2008. Pretty much every country has suffered in some fashion. What many countries have done is throw money at the problem, which I don’t totally disagree with, but without a specific strategy for what they wanted to do, it hasn’t worked all that well.
At the same time, unemployment has been a big problem in many countries. Even though the United States would love to blame its problems all on companies that have taken jobs to other places and illegal immigration, the fact is that this was probably a long time in coming and that almost everyone had to know it was on its way. I had figured it was on its way back in 2001, and felt that many people had their heads in the sand instead of looking ahead and trying to brace for the future in some way.
Governments did what governments do; they created more money to try to help out. That often ends up destabilizing someone because it makes some currency worthless, or at least reduces what it’s worth in other countries. Who remembers that for awhile last year Canadian and American currency was worth the same thing? I remember when you used to get the equivalent of $1.64 for an American dollar; now you get $1.27.
Meanwhile, unemployment hasn’t snapped back, but the government is trying to encourage people to spend their money. For at least 10% of the population in the United States eligible for a job, it’s not happening. For at least 40% of the working population, it’s not wise because they’ve taken jobs that are paying them less than jobs they had previously. That doesn’t leave a lot of people with extra money to spend unwisely. Even when the government was giving us money ala President Bush, most people used that money to pay bills rather than to spend frivolously.
My previous post about New York is basically true for the rest of the country. There’s less money to spend, less credit to use, fewer companies to spend the money on. Many specialty shops have closed and prices haven’t exactly dropped to encourage people to go out and find deals. Even Walmart struggled a little bit for awhile (heck, did they close all Sam’s Club’s?). And both state and federal governments are balking at spending money on programs that are needed because they say they’re worried about the deficits, everywhere except in their own regions.
The question stands; can these governments actually do what they hope to do? I tend to believe absolutely not; at least not right now. There are just too many negatives that everyone has to deal with, including unstable governments. It’s going to take a hero to step forward somewhere and be able to gain a true consensus. Unfortunately, there are too many people who think it’s all about them and not about the people, so it’s not going to get done.