This is, perhaps, the most controversial slide in Richard Koo’s latest presentation on the state of the global economy.
It’s about why, when governments are trying to jumpstart their economies by spending money, it really sucks to be in a democracy.
Click to enlarge.
Photo: Richard Koo, Nomura
As Koo sees it, the US, Japan, and the UK have no real fiscal constraint. The only constraint is politics.
A country like China doesn’t have the political problem. If you need more stimulus, you just spend the money.
In the US you have all of the cliches listed in the right column above. Anyone who has been alive for the last four years will recognise all of those comments.
And with “fiscal cliff” timebomb coming in 2013, and the inevitable political challenges that will be brought there, the problems with democracy will even be more acute.