Word: booming
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...cutting welfare spending and raising taxes. A generation of economists inspired by John Maynard Keynes taught us that this is precisely the wrong thing to do. Government deficits in a recession are good, the Keynesians argued, because they stimulate demand. The Bush Administration, which ran substantial deficits in the boom years, looks set to run an even larger deficit...
...into its 59th quarter and then into its 60th and 61st quarter and beyond ... Inflation has fallen from 3% to 2.8%, and will fall further this year to 2% ... Looking ahead to 2008 and 2009, inflation will also be on target. And we will never return to the old boom and bust." Thus Gordon Brown, as Britain's Chancellor of the Exchequer, in his Budget statement only last year. No Chancellor since the war has quite so disastrously misread the economic situation, or so fundamentally misunderstood the inescapable nature of market economies - namely, that the greater the binge, the greater...
...Brown was by no means alone in his folly. Banks and financial institutions throughout the Western world acted as if the economic cycle was a thing of the past. Instead of understanding that the longer the debt-fueled boom lasted and the greater the debt burden became, the greater would be the carnage when the inevitable day of reckoning arrived, they acted as if the longer the good times lasted the more they could be regarded as a permanent fixture...
...above all, everyone - banks, borrowers, regulators, central bankers and politicians - must be ever mindful that there is no such thing as an end to boom and bust...
...problem? A lot of the people who created the problem have already lost their jobs, but yes, any bailout risks rewarding the profligate and the foolish. But we're getting to the point where financial sector problems are starting to hurt people who didn't profit from the boom. And you can design a bailout that's not so much a bailout as a new start--such as the Swedish solution outlined above...