Responsible governments have no business borrowing vast sums from abroad, rather than from domestic sources. That’s what tinpot regimes do. And lending even more to borrowers who can’t pay what they already owe? That’s what loan sharks and mafiosi do.
The IMF’s business model sabotages properly functioning capitalism, victimizing ordinary people while benefiting the elites.

The truth is that the increase in what is called the productivity of labor is due to the employment of better tools and machines. A hundred workers in a modern factory produce per unit of time a multiple of what a hundred workers used to produce in the workshops of precapitalistic craftsmen. This improvement is not conditioned by higher skill, competence, or application on the part of the individual worker. (It is a fact that the proficiency needed by medieval artisans towered far above that of many categories of present-day factory hands.) It is due to the employment of more efficient tools and machines which, in turn, is the effect of the accumulation and investment of more capital.

Under the Factor-Price Equalization hypothesis, the reduced rate of business formation and business hiring would be a symptom, not a cause. In fact, under most hypotheses, that would be the case. For reduced rate of business formation and hiring to be a causal factor, I think one would have to ask what has changed in the regulatory environment to make these processes more difficult. I can tell stories about this (cost of employer-provided health insurance, credential restrictions in health care and education), but I could also tell stories that run the other way (low cost of starting a business on the Internet).

But there are always taxpayers and taxeaters, even though government has so wormed its way into every organ of the body politic that it is sometimes difficult to tell which are which.

Gentle reader, you need to understand that the market does not get it. Neither in Europe nor in the US. When someone says the market has already priced in a default, go back and ask them how well the market priced in a crisis in the spring of 2008. The market doesn’t know jack. I got a lot of internet buzz from a throwaway line in an interview on CNBC in London. I said that if the market knew what Bernanke and the leadership of the central banks talked about after their third glass of wine, the market would wet its pants. That is not to suggest I don’t think Bernanke or Trichet can hold their liquor. It means that they get the problem more than they let on in public and are simply trying to stem as much damage as they can. Banking crises are followed by credit crises by 2-3 years. It is getting close to that time. We need 3-3.5% GDP growth in the US to really make a dent in jobs. We are not going to get it. There is nothing we can do other than Muddle Through as best we can. Prepare accordingly.

The economy burns while Washington fiddles—and what our chosen representatives and the administration are fiddling with is not the great American job machine, which, as June’s downright putrid employment report demonstrated beyond cavil, badly needs cranking up. Instead, they are laboring unstintingly on how to plug the deficit gap by such smarmy tactics as changing the way inflation is reckoned to make it easier to stick it to the geezers.

Shame on the Republicans and shame on the Democrats! Their behavior, the uncertainty they have introduced to America’s business, their disrespect for working folks and entrepreneurs, is a cause of the weak economic recovery. Their partisan threats and finger pointing are awful behavior. When I travel throughout the world, I find it an embarrassment to talk about members of the Congress of the United States, both those in the House of Representatives and in the Senate. If there were only some way Americans could get angry enough with both parties and want to throw them all out and start over again, we would have a catalyst for change. Warren Buffett’s solution for the deficit is the best one. Let me paraphrase him. Whenever the deficit is higher than 3% of GDP, all sitting members of Congress must resign and be barred from running for re-election. Oh, and could we get that as a constitutional amendment?

We might agree that prosperity requires that a great deal of manufacturing occur somewhere. But as long as there is “a big manufacturing base” in the world economy, what need is there for “a big manufacturing base” in the economy of each political entity classified as a nation? If a nation has such a substantial comparative advantage in services that it satisfies with imports so many of its demands for manufactured goods that no manufacturing takes place within its borders, where’s the harm? Answer: nowhere.

It’s a good thing “Greece is Saved” so we can all turn our attention to something far more important, like saving Italy.