No I am not making this up-how could anyone? This is “economics” straight out of the world of the Bavarian Republic’s Cabinet Minister Professor Zip of glorious memory.
“The Irish agriculture minister, Brendan Smith, said the free cheddar scheme was ‘contributing towards the well-being of the most deprived citizens’. A caller to RTÉ radio asked, ‘have they taken leave of their senses?’
The country may be a few heartbeats away from intervention by the International Monetary Fund but today the Irish government had a novel message for the public: let them eat cheese.
Brendan Smith, the agriculture minister, announced a European Union-funded scheme today that will enable the country to tuck into the EU’s cheese mountain. 53 tonnes of fresh cheddar will be distributed from 15 November with collection centres in towns and cities around the country.”
And this highly ironic, but salutatory column gives further background on this sad state of affairs, from the highly entertaining Nadeem Walayat, a regular contributor to the financial blog Market Oracle Walayat said:
“An exhausted Irish Government devoid of any new workable solutions to the spiraling debt crisis, unable to print money and inflate their way out of debt are instead announcing policies the likes of Quantitative Cheesing, which literally boils down to handing out parcels of cheese from the European Unions Cheese Mountain to Irish families to consume or trade as opposed to handing out money which they are unable to do. This is no joke, as a 55 ton handout of E.U. cheese is heading for Irish towns and cities, which does not exactly send a message of confidence to the financial markets as to the state of the Irish economy.”
America has the ability to print money and debase the currency.The idea being that banks,which are currently hoarding money,will be forced to lend it as it will lose value sitting in their vaults so to speak. Thus the economy will receive, at last, an injection of funds which will go to create jobs.
All well in theory but in practice the banks,instead of lending to small business/home purchasers do not have to take any risk with this money they can simply send it offshore. They can get high rates o f interest in Australia for example or they can use it to finance business ventures or real estate in the hot economies of Asia.
This of course exactly why President Obama got such a poor reception at the G20-these countries,which are overheating already e.g. China, do not want a huge pile of hot money pouring in and creating a bubble which will inevitably lead to a crash. Of course if that happens, the last bastion of economic growth for America to export to will collapse, leading to a further recession for the US economy.
With the US currency still a reserve currency (for the time being) America has the option of riding the recession out without cutting spending to the point where, like in Ireland, the economy goes further into recession. Neither does it have to endlessly print money which leads to inflation, as Sarah Palin pointed out, or worse, to stagflation. If, when the 2008 financial crisis hit, the rotten firms and banks had been left to go out of business and the natural business cycle had been allowed to let new, better firms and finance companies take their place, and the government had immediately cut taxes to ensure spending power went to where it was best used and needed, then we would not be in the seemingly intractable unemployment and stagflation situation we are in.
The tax cut option, is still the best way forward-Palin’s “common sense solution”. There is an alternative however, the USA can, like Ireland, become a beggar nation-perhaps the Chinese can send us mountains of noodles?