EclecticLip

In a recession, government revenues drop.  If government spending drops in line with revenues, that reinforces the cycle of economic contraction.  The alternative is to auction off public property in an attempt to raise funds. That doesn’t fit the traditional definition of the tragedy of the commons, but it is a tragedy, and it does involve the commons.

Mike Shedlock points out that 44 of 50 states are facing deficits totalling 14 percent of their budget.  Krugman adeptly points out how balanced-budget legislation is worsening the problem, here.  From an engineering perspective, such legislation reduces the degrees of freedom one has, in solving the problem.

The way out of this mess — a long, hard slog — is probably going to involve a lot of Keynesian spending / aid. (There’s been a request for a trillion dollars in state-level aid: that’s $1,000,000,000,000.  And every penny would surely earn a better return than in the nearly-as-big financial-sector bailout.)  I don’t know if that’s the best solution, but it’s probably the only solution palatable to many governments: at least they look like they’re trying to do something.
I’d expect to competitive currency devaluations soon, as alluded to in this post from Jesse’s Cafe Americain.* While the price of many commodities will be a function of economic health, I’d expect gold to continue its seven-year-march upwards, with the occasional correction — and for global markets to get one more nasty leg down, on reasoning similar to Mish’s in this post here.

*As a point of interest, Jesse’s old site combined two handles — Jesse Livermore and Arthur Cutten — both of them, names of speculative titans from back in the day.