Arnsperger's back

Christian Arnsperger finally has a new blog post after 5 months. Here are a few excerpts:

"The housing asset-price bubbles was used as a strategic tool. It was encouraged and consciously sustained. It was, in a sense, the ultimate bet: Let a localized inflationary craze generate sufficient bank-account wealth for a sufficient number of people, so that when they start to spend this as yet unbacked monetary wealth, the material wealth that was needed to back it would start getting produced.

"Greenspan's bet, rooted in his deep faith in self-regulating markets and in the 'prosperity as growth' paradigm, was that this would jump-start a virtuous process through which the real economy would rally to quickly close the gaping chasm created by the financial and monetary logic of money creation. It didn't work. It eventually forced most States to create even more debt in order to bail out the perilously exposed banks and financial institutions that had speculated on the continuation of growth. And now that the sovereign-debt crisis is threatening the whole architecture, the immediate reflex is to try to spur on growth through yet another "trick": no longer through a new asset-price bubble, but through a massive 'austerity' plan based on the idea that since private-sector economic agents are better able than the public sector to generate real wealth quickly, so that public spending has to be reduced drastically in order to free up resources for investors, private employers, and privately employed households to spur on growth. Austerity measures are thought to be a growth-creating measure by which the reduction of public deficits will supposedly increase private opportunities, so that supposedly efficient competitive markets will generate the needed economic growth.

"Does that sound like the remedy is awfully similar to what caused the disease? Only because it is. And it couldn't be any different as long as the basic architecture of the financial and monetary system remains what it has been. Prosperity as forced growth is simply how this system defines the possible horizon."