The resurgence of Keynesian economic theory across the developed world has not done much to hold back the tides of economic storms. Neither has their use of printing presses and taxation schemes been sufficient bulwarks against crushing debt and credit downgrades. If anything these schemes have added to their woes and endangered their future.

In Europe, Italy’s latest downgrade is just another blow as it struggles to cope with its social promises on one hand and the need to grow economically on the other. Protesters in countries from Bulgaria to Portugal want to rip from power those who they recently elected and start over. That is not even mentioning the problems in Spain, Greece and elsewhere. Unfortunately as Europe slides inevitably back into recession the misery of these people is only going to increase. Maybe not the most joyous of predictions but a realistic one.

The plain truth is the politicians and central bankers of Europe, who created this mess in the first place, have forgotten what every farmer knows. You cannot load down a sick animal. The debts, no matter how significant, can’t be laid too heavily on the backs of economies struggling to stay afloat. Healing pro-growth measures, ones that do not rely on monetary chicanery, must be put in place first. Heal the economy than you can heal the finances. Trying to do this in reverse is foolhardy and ultimately dangerous. While debts and deficits must be dealt with and dealt with sooner than later, the real issue at the moment is the economic chaos caused by the faltering economy.

In Japan where full tilt Keynesian economic solutions have been in place for some time the economic outlook is even worse. Japan is in recession and could end up in a Depression. Their only answer seems to be to print more money to do more of what has proven not to work. A clear case of desperate insanity breeding more desperation and insanity.

In America things are not much better, the struggling giant is gasping and struggling to stay afloat. On one hand Wall Street seems to be doing well but main street is still in trouble. Of course Wall Street is flush with cheap Fed cash and investment capital fleeing the negative savings rates offered by banks. All of which makes the Wall Street bull market nothing more than fancy wall paper put over rotten walls, walls that might very well collapse on their heads.

To understand what is really happening one has to look beyond the ticker tape and media fanfare. Labor participation rates are still stuck at forty year lows, incomes have tumbled back nearly twenty years and disposable income last month dropped the most on record! On the other hand the number of long term unemployed and those on welfare is at all time highs. Multi-generational households are making a comeback too. America’s flat lined economic growth, while not as bad as Europe or Japan, on a good month only produces enough jobs to break even with population growth.

Barack Obama for his part has handed over management (or mismanagement depending on your perspective) of the economy to the Federal Reserve. His strategy seems to be do nothing to help the market recover and blame Republicans when things go bad (and take credit for every blip of good news). If he has had any real economic strategy it has been to increase employment by growing government, something that hit against a brick wall of financial reality.

Around the world real growth policies of lower taxes, lessening the regulatory burdens and sound money have been demagogued and demonized. In their place the the world has been treated to buffet of class warfare, printed cash and regulatory hell. It seems none of the world leaders has the common sense of a farmer.

The unfortunate truth is that there is little hope of change in the near future. In Europe new early elections can be held but in a Union where much of the power lies in Brussels (and Berlin) and EU central banks, changing the faces roaming the halls of parliaments is likely to do little good. In Japan they have bought the Keynesian myth hook line and sinker, and sinking they are. As far as American prospects; spending reductions have finally come but in haphazard illogical fashion that does far too little. Real growth inducing policies are not even on Barack Obama’s agenda. Instead for his next term he has promised crushing global warming regulations, expansion of ObamaCare and more attacks on the wealthy. A recipe that is bound to contribute to continuing the worst “recovery” in history, if not push it back into decline.

With Europe in chaos, Japan on life support and the U.S. considering more people dropping out of the workforce then jumping in good news; things do seem like the world economy is near the brink. The truth is it is hard for any of these economies to make way against a headwind of bad politics and bad policies. The best advice one hears on the street is for individuals to get out of debt and brace for what is sure to be a bumpy ride ahead.

“The Conservative Mind”

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Other Links:

Proof the Fed is Juicing the Markets

Only 1 in 4 Americans Think Economy Doing Better, A New Low

More Workers Go Part-time Ahead of Obamacare

“prospective return from a balanced American portfolio is the lowest it has been for a century” The Economist

February’s Job Numbers Look so Good because Our Expectations are so Low

Number of People Dropping Out of the Workforce Exceeds Those that Got Jobs.