Brenda: Europe’s economic austerity plan has saving the Euro as its main objective. However, once implemented, it will tank the European economy for more than a decade.
Judy: Right. Also, many of the benefits that European workers have attained through the years will be lost. For instance: an early retirement plan, free health care for everyone and maternity pay. And that just the beginning. Most European countries will have to learn to live with high unemployment rates and no economic growth for more than a decade.
Brenda: We are in trouble here too. Congress seems to have two lines of thought; those that think the rescue package didn’t work and that any monetary injection into the economy will be a waste of time and the others who believe that the rescue package did work, although poorly, and slowly but surely the economy will grow. The last group of Congressmen will try to rescue the economy until the deficit hits a dangerous level and it will only mildly improve the present economic conditions.
Judy: I guess both groups in Congress will not back any new stimulus programs in the near future.
Brenda: Yes, we won’t have any futher stimulus which will ultimately create an economic depression by 2011.
Judy: I think you probably remember in 2009 when Obama approved the stimulus fiscal tax reduction package for 282 billion dollars, another health education and unemployment package for 224 billion and finally 275 billion in other forms of federal aid. That added up to 787 billion to stop our GDP free fall.
Brenda: I know I remember that in the first quarter of 2009 our GDP fell 6.4 percent thanks to the rescue package. By the 2nd quarter the GDP had started to grow again. Still, unemployment remained around 10 percent which was too high for the economy to climb out of the hole.
Judy: Unfortunately consumers used their federal aid to get rid of their debts and banks used the government’s help to buy more toxic bonds and invest in U.S. bonds instead of making more loans with reasonable interest rates available to the public. By the Fall almost all of the fiscal stimulus from the Obama administration will have come to an end. Then a world depression will haunt us. I think those that think China’s commercial demand will save us are in for a surprise. China won’t grow much next year because their economy is based mostly on exports which neither Europe or the U.S. has demand for. China’s internal demand can’t pull the world’s economy out of the doldrums. In fact, China’s internal consumption isn’t strong enough to pull itself up. I wonder exactly how bad things are going to get in 2011?