|
Tuesday, 6 January, 2009 11:35 PM
Leading Economist: Bail
Out Homeowners Now!
Economist
Condemns Bank Bailouts, Calls For Homeowner Rescue
Photo
credit: www.amazon.com
"The
New Golden Age: A Revolution Against Political Corruption and Economic
Chaos"
Homeowners
and consumers need a Special Victims Unit, because the government
is bailing out criminals.
According to Dr. Ravi Batra, economics professor and author of The
New Golden Age: A Revolution Against Political Corruption and Economic
Chaos (www.ravibatra.com),
bailing out banks is like bailing out criminals while victims are
left to suffer. The only difference here is that the victims, homeowners
and consumers, are the foundation of the economy, and they are hurting
because their wages have not kept pace with rising prices. The celebrated
economist Milton Friedman once said that the true test of a theory
is its forecasting ability. Batra’s theories easily pass this
sterling test. This is because in the first edition of his book
printed in 2006 Batra vividly foresaw the current economic chaos
in all its dimensions. He forewarned us about stock market losses,
the credit crunch, homeowner defaults and above all soaring unemployment,
starting in 2007 and lasting at least till 2010.
Yet Batra regards all these as just the symptoms, not the root cause
of the problem. Unlike traditional economists, he argues that the
real problem is deeper, because it springs from the vast imbalance
of the two fundamentals—supply and demand. The main source
of supply is productivity whereas the main source of demand are
people’s wages.
Since productivity has been soaring because of the computer revolution,
while wages have been stagnant, supply has risen faster than demand
over the last 30 years. However, debt also raises demand, so the
government has artificially maintained the supply-demand balance
by creating a mountain of debt through its own budget deficits and
by luring people into borrowing through low interest rates. By now
the nation is in hawk as never before, and the credit crisis has
inevitably followed. Hence the solution is not in generating more
debt, which is what the Bush administration has been doing with
little success and what the new administration proposes, but in
following policies that will raise wages and bring them in line
with the vast jump in productivity. At present, with supply exceeding
demand, there is overproduction and hence mounting layoffs.
Batra
offers a five point program to fix the current mess:
-
Raise the hourly minimum wage by $1 every year until it
reaches $10.
-
Raise the salaries of government employees by 10%, which
China did in November.
-
Bailout the harried homeowner and not Wall Street and big
banks, because if the homeowner can make mortgage payments,
banks will be in good shape.
-
The government should buy the shares of GM and Ford for
$5 billion and give them to their workers, whose representatives
will then run the companies. It will then be up to them
to save their jobs. The government may also spend another
$10 billion to lighten the burden of pension and healthcare
costs in the auto industry.
-
Trim the trade deficit sharply by fixing the dollar exchange
rate with the currencies of China, Japan and the Eurozone.
Without this measure all others will have limited success.
|
“Just throwing money at the current economic chaos is like
a doctor giving pain killers to his patient. That does not cure
the illness. We need real economic reforms to eliminate the fundamental
imbalance between supply and demand. Without the proposed measures,
2009 will be a lot worse than 2008.”
Batra, the economist who foresaw the current crisis, as well as
the ascension of President-Elect Barack Obama, has a long track
record of predicting cycles in the economy. His concern today is
about the philosophy of handing the healing of our economy over
to people with much experience but old ideas. New troubles require
novel approaches, not the hackneyed ideas that have brought us to
the brink of a depression.
About Dr. Ravi Batra
Dr. Ravi Batra, a professor of economics at Southern Methodist University
(Dallas) is the author of five international best sellers. He was
the chairperson of his department from 1977 to 1980. In 1990, the
Italian prime minister awarded him a Medal of Italian Senate for
writing a book that correctly predicted the downfall of Soviet Communism,
fifteen years before it happened.
Dr. Batra has been written up in major newspapers and magazines
such as the New York Times, Washington Post, USA Today, Time, Newsweek,
the U.S. News and World Report, and appeared on all major networks
including CBS, NBC, CNN, ABC, CNBC, among others.
Source:
News and Experts
|
