Getting Out of Recession

Economic books have been fervently revisited in the recent past by economists trying to find out a way out of this drab recession. The race to find the ‘optimum’ solution has led to two prominent schools of thought to come into the picture. One tells the government to spend and the other to tighten the purse strings.

Keynes helped the world to get out of the Great Depression by prescribing spending; spending by the government on roads and infrastructure. This led to people getting employed and they got money to increase consumption, this led to a revival of the industries and then the economy.

The 2008 recession was caused by people spending too much and that too, money that they didn’t have. It was a disaster waiting to happen. Economists didn’t regulate this because nobody says stop when the going is good. The world did its share of bailouts and managed to sprout a new life. The greedy bankers had lavish parties and their large bonuses were plastered all over the newspapers. People clearly didn’t like that (Occupy Wall Street), any spending of public money was curtailed and whatever little was done, was done very cautiously.

Meanwhile, the idiots in Europe had forgotten to stop spending since the war, so they had taken billions of Euros in bonds and loans that they couldn’t pay back even if their cheeses depended on it. Fortunately, they had the EU to take care of their fat behinds, actually only Germany was there, so Merkel being a proper Margaret Thatcher told them to tighten their belts if they wanted money for food and wine.  That’s how “Austerity” came into the picture. People working in the government, which is actually a huge number, are now forced to drink only €1/ bottle wine.  People lose their confidence, consumption reduces, companies try hard to reduce their costs so they export jobs, people lose their jobs, consumption reduces further and the cycle continues

Where is the money? Let’s rewind back to pre-2008.  People bought property, pushing property prices, banks realising this opportunity starting giving sub prime loans, these were then packaged and sold off to idiots, the banks then had more money to lend, so they gave to more sub prime people, the prices went up again, the sub prime people took more loans on the same property by getting it reassessed. People spent this money by consuming goods and investing in more property. So, all this money is locked up with big companies (Apple has more than $100 billion in cash reserves), with banks and with shrewd people (the 1 percent-ers)

The problem now is that the governments and the middle class don’t have any money. Money being with the rich is useless in the bigger scheme of things. Unlocking this money is the only way out of this mess. 


If we are going with ‘spending’ then we should get them to invest in things by giving them huge deal sweeteners. So they will spend for their own profit and incidentally, revive the economy. 


If we go with ‘austerity” then we should force the money out of them by imposing huge taxes and regulation, so the government can use it to revive the economy.However, the problem is that the rich run the governments.


Guess, we'll have to beg the rich to get us out of this rut.