Brian27

Macroeconomic Policy for a Stronger Recovery, Part 2

The Great Depression became the great depression because of the policies followed from 1933 to 1939.


On Oct 01 08:43 AM chap08 wrote:

> Brad, your article is just not going to be popular with SA's collection
> of cowboys and Austrians. I, on the other hand, would have some sympathy
> with your view, if we had not had such bad government for many years.
> Unfortunately though, we have had bad government for many years and
> that has left us with a massive national debt. Without the debt,
> I would be supportive of more counter-cyclical spending. Sadly though,
> we can't afford it. We spent it all in the good times, in a stupid
> pro-cyclical way. Now we're close to bust.
>
> So instead, I advocate another approach. This approach is even less
> popular on SA if you can believe that! My approach is to let the
> dollar devalue - to get it down to something approaching fair value
> - where it would be without currency intervention.
>
> Currently the dollar is propped up by the mercantilists. If they
> stepped back, then the dollar would fall. The Chinese and others
> keep the dollar up so that they can keep domestic unemployment low.
> The other side of that coin is that our unemployment stays high.
> The reality of our trade deficit and high unemployment will not change
> without a lower dollar. To believe otherwise is a fantasy. You can
> talk about fiscal stimulus, trade barriers and other sticking plasters,
> but the only real solution is a lower dollar.
>
> In 33/34, they used the gold standard to devalue the dollar by over
> 65%. That was a key part of the medicine that cured the Great Depression.
> We don't need anything on that scale or at that speed, but we need
> some of the same medicine. History and international experience shows
> that currency devaluation is just as effective as fiscal stimulus
> in creating growth.
>
> You can throw more taxpayers money at it. You can throw more future
> taxpayers money at it. You can stimulate and stimulate. But, we live
> in a globalized world now, and until we are internationally competitive
> again, we will never properly recover.