Ray Hendon

The G-20 Sings a Song of Sixpence

I suggest you do a little more research on J.M. Keynes, including his role at the Bretton Woods Conference, and his place in establishing macro-economic theory. If you look at any elementary economic text book for the last forty years, Keynes' theories and policy recommendations have dominated about half the volume.

I also reject any bias because I use to teach economics and finance in college. No one deserves to be assigned either a liberal or conservative label just because they chose that profession. Economic theory does not come in flavors of liberal or conservative. It comes as a study in trade-offs between competing goals with limited resources.

If you want some current relevance of Keynes, study his liquidity trap theory, which thoroughly explains our current situation of trying to use monetary policy to get out of a serious economic downturn.

Lastly, I did not expect any great things from the meeting of this week. I suggest you re-read what I wrote. I think the next meeting, in 100 days or so will be the more meaty of the two. All participants need some tome to study their options, and there will be some fundamental differences about the role of regulation, size of stimulus and IMF participation.

I also disagree with your assessment of the IMF over the years. Check out the hundreds of countries what have borrowed from the IMF and taken their advice on how to straighten out their economies. I think once you are more familiar with the facts of the situation, you will draw a different conclusion.

Everyone of good will wants the situation to get better. I have no particular biases that cannot be broken if it would help. I am not sure you understand the seriousness of the crisis we face. The wheels have come of the world's economies. Major stuff is needed to put them back on. Clinging to ignorance and prejudice will not do the job.

Also, to assign to Keynes the problems the UK has had since WWII is rather simplistic and, simply, wrong. He was a private economist and currency trader. The British Empire was at the end of it life because of a host of factors, none of which were under the power of J.M Keynes.

Best wishes,

Ray

The G-20 Sings a Song of Sixpence

The major contributors to an expanded IMF fund would be Europe, America, Japan and Saudia Arabia. All these nations have good supplies of foreign reserves, and could make contributions in the hundreds of billions of dollars if needed.

I agree with you that the Bush Administration has used the IMF and the World Bank as dumping grounds for washed up hacks. But it hasn't always been that way, and it will not be in the future, at least is the G-20 members gave their way. Also, some of the past Administrations have actually put good people in these positions.

Best Wishes,

Ray

Recession Talk Has Gone From 'If' to 'How Bad'

Thanks to all for the comments. I do not write this kind of article reinforce my own opinion. Regardless of what I would like to happen, the economy has its own mind, so to speak. And, I don't know if we are going to have a serious recession or not. But, there are many headwinds that give me cause of caution.

johnheiderscheit and seven West, it is never the absolute rate of employment or unemployment that we look to as signs of recessions; it is the rate of change. I'm afraid that today's unemployment rates are almost a full point higher than this time last year. This is not a good trend. Also, keep in mind that unemployment is a lagging indicator, not a leading one.

The same is true for inflation. It is at a higher rate this last year than in previous years--again, not a good sign. Also, consumer spending, the ultimate culprit in our drama, has not held up well. December sales were far from robust--an ominous sign, to me.

But, I hope both of you are right. I certainly don't want a recession. Although I am free of job market constraints myself, it never does my portfolio any good to go through a downturn.

robyt and Danial Magid, thanks for the good words. And, thanks, Danial, for introducing me to a new acronym, DINKS.

Best wishes,

Ray