There is a 300 pound gorilla in the room that Robert Reich overlooks and this is the role of the privately owned fractional reserve banking system in the ongoing crisis. Because there is too much debt it means that countries are having to spend too much of their incomes paying the interest on their debt. Recent reports indicate that this problem is so serious that the Rothschilds are now receiving around two thirds of the world's income as interest on the loans they have made. This is because they own the right to create money in most countries and do so out of thin air.
What this means is the rest of us have to get by on a third of what we produce and this is why there is a crisis and this is why it cannot be fixed without systemic change. The options right now are that either the financial system will collapse and the debt will be cancelled or that the right to issue money will be taken away from the Rothschilds and returned to the public. It is possible to replace the current debt based financial system with an asset based one where there is no interest and should this path be followed the crisis would be over and a new era of growth will begin.

Reich has the basics correct but not the authors of European, or Nafta block austerity. All economic doctrine has political roots and visa versa. So who's calling the shots here? Is it the political leaders or some other form of national economic control?Europe is one of the last bastions of social security programs state funded, but paid for increasingly by the populace as corporations continue to avoid paying as much tax as possible. There is an international war of neo classical ideology being waged. And what better time to really go on the offensive than at a time of multi national crisises, a la Klein's shock doctrine. The goal is to turn all of the world's nations economies into something resembling China's. Not good for the 99%. For the 1% and their central and international banks there is much work to be done to achieve this goal. The instigation of a slow moving depression, so as not to alarm the whole populations at once and to be able to play one against the other, is in the play book. Merkel, Obama, Harper, Cameron etc have very little to say on the matter and are told what will be, else the velvet glove is removed from the iron fist of the financial monsters that stroll their domains.How do we know this? Because economic theory has long ago provided the answers to recovery from malfeasance bubble induced recession/depressions; as Reich pointed out governments must spend their way out of them. So why hasn't the word been put forth to do just that by the central banks and their creations the IMF, BIS, World Bank and others like Gatt etc? Because they have something else in mind.

There is one thing people world-wide need to understand: We cannot expand anything infinitely, including any economy. Period.

A simply syllogism proves how capitalism, as we know it, is a cooked goose:

If capitalism necessitates that there be an ever increasing profit; then capitalism necessitates infinite expansion. (We see this on Wall street with the necessity to ever increase stock prices. )

Capitalism in its current form does necessitate infinite growth.

Ergo, capitalism in its current form is unsustainable.

That's why expanding derivatives to include the selling and buying of loans was invented in the 90s--ways to make profits by infinite investments were not sustainable. Loan derivatives were a way to fake growth--since ways to profit from real investments were in decline.

Then, when loan derivatives had been traded so many times that they were so expensive that they could no longer be packaged and sold again, the banks needed either a new way to make money, or more loans.

So, they created more loans by offering subprime loans to those who they new could never repay them. Then, in order to not only trade the new loans, but to make money on top of the trades, they offered a way to bet on the future success or failure of those loans--futures.

Then they decided that in order to give themselves a more secure investment in the loans and futures, they needed insurance to pay off if they failed. A perfect system. You can't fail! Or, if your investment does fail from default, the insurance kicks in and pays off anyway. In fact, now you can not only bet on the success of your investment, but you can loan money that has little chance of being repaid, and bet that it will fail.

Problem: This is like a pyramid scheme. And when the loan derivatives became too expensive to resell, and when people began to default, the banks wanted to cash in on their insurance.

Problem: The insurance companies were over leveraged in toxic assets--loans that would never be repaid.

Result: Infinite growth mentality results in a complete melt down of the world economy.

Post result: It's going to get worse. The economy is going to go into full failure. Except this time there won't be any government money, like there was in the 1930s, to help support work programs or soup lines, or to loan to legitimate companies who need the capital--because the government is WAY over leveraged too. In other words, it can no longer get loans from other countries, like China, in order to invest in legitimate investment.

Good article. Very straight forward, indeed.