Printing money for the coming crises or asking some better questions

Reserve Bank governor Glenn Stevens should give us a piece of his mind on the chances of central banks printing money for the coming crises. That’s what every smart company director needs to know before betting their company’s future after the running of the Melbourne Cup.

It’s worrying that Marc Faber, the author of the Gloom, Boom, and Doom Report, says that a global recession is all but a certainty later this year or in early 2013. When he was asked what sort of odds he put on a global recession happening, the economist famous for his ominous predictions quickly answered: “100%”.

Faber’s pessimism during his recent appearance on CNBC wasn’t surprising for a man whose nickname is “Doctor Doom”. But he is an optimist compared with Dr Robert Wiedemer, who accurately predicted the economic collapse that almost sunk the United States.

In 2006, Wiedemer co-authored America’s Bubble Economy, a book that accurately predicted the Great Recession and the popping of the housing, private credit, stock and consumer spending bubbles.

Three years on, he co-wrote the bestseller Aftershock (with the second edition containing some pertinent updates) where he again provided the economic analysis underlying his accurate financial and economic predictions.

Now he sees much more widespread economic destruction and makes Dr Doom look like an optimist. He has been working on developing a new economic framework for better understanding how the economy evolves called STEP Evolution (STEP stands for science, technology, economics, politics). STEP Evolution is the basis for his highly accurate and prescient predictions about the present and future economy.

The US Securities and Exchange Commission (the SEC) has just rolled its boss and deferred decisions about note printing until after Congress gets over its dummy spit and the fiscal cliff. In Europe, the world’s strongest woman (Angela not Gina) is pushing Greece, Spain and, hence, Europe over a very different cliff.

Noted economist, Paul Krugman also takes the view that central banks need to release targeted liquidity to small and medium companies that are likely to be the source of new jobs. He says that firms should be encouraged to be expanding but cannot grow at present because financing is not available on any but usurious terms.

Paul Krugman doesn’t think Romney’s VP candidate Paul Ryan’s budget plan should be taken seriously.

“This is just a fantasy, not a serious policy proposal,” Krugman, the Nobel Prize-winning Princeton economics professor and New York Times columnist, wrote in a blog post Monday:

“Look, Ryan hasn’t ‘crunched the numbers’; he has just scribbled some stuff down, without checking at all to see if it makes sense. He asserts that he can cut taxes without net loss of revenue by closing unspecified loopholes; he asserts that he can cut discretionary spending to levels not seen since Calvin Coolidge, without saying how; he asserts that he can convert Medicare to a voucher system, with much lower spending than now projected, without even a hint of how this is supposed to work.”

Ryan’s budget would slash all federal spending – outside of Medicare, Medicaid and Social Security – by 70% by 2050, perhaps an unrealistic assumption considering that Romney has promised to keep defence spending above those levels. Ryan also has proposed cutting individual and corporate tax rates and getting rid of taxes on corporate income, capital gains, estates, interest and dividends. Ryan’s budget is generous to the wealthiest Americans on capital gains.

Today, Glenn Stevens will be answering questions about his team’s involvement in a note printing bribery scandal. While this will keep the Greens on the edge of their seats it is the wrong question about times gone by. We really need answers about the doom-laden claims about the coming year from some very smart and successful financial analysts.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.

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