Ray Hendon

Economic Outlook for 2009: A New Deal for a House of Cards

We will see something of the effects by the end of next year. Since so many economies of the G-20 are in trouble, most of them will initiate some kind of fiscal stimulus. It will not be formally coordinated, but it will be more or less simultaneous, which will work just about as well.

Best wishes,

Ray

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

Stagflation and the Limits of Growth

I apprecate all the coments. I can see that there has already been much thought on this subject. A couple of specifics: bbzz24: don't assign the propensities of the gulf countries to the rest of the world. This part of the Middleast is, essentially, a one trick poney. They have oil, more oil, and, oil. Plus the distribution of inome from their oil deposints is not even. The reigning families control most of it, and the rest get little. This doesn't give the majority of the population much room to become entreprneurs. The can be expectd to continue producing oil because that is all they have.

But in China, India and other developing nations, it's an entirely different story. They have resources beyond a single commodity, and they have a histoy of exploiting these advantages. So, I think that the response of the rest of the developing world will be substantially different than that of Arabia.

There is not doubt in my mind that the future will be more competitive that it has been in the past. We must work harder to stay in the same place. But, America has such a great advantge in resources and experience, and in the willingness of its people to put their shoulders to the wheel, that I think we will do well in the competition. While we have been guilty of being lazy and fat, we are much more than that. Just watch and wait. You'll see.

Best wishes,

Ray

Stagflation and the Limits of Growth

I don't have a handle on the timeframe, at least in terms of competion. In economic proceses, things are rarely completed, anyway. Before one adjustmen is fully made, others begin. But, I don't think the U.S. will suffer as long as you think. With prices so high, the incentives to produce are high, so I think there will be some heroic efforts made to cash in on them--perhaps this will shorten the process.

But I agree with the implications of flatman and fabian-the pie will grow, but our share will not be as big as it once was. This doesn't have to be such bad news, however. I think the pie wll grow a lot, given the incentives. In that case, a smaller share of a bigger pie may leave us in good shape--depending on how much it grows and how big our share turns out to be.

Best wishes,

Ray