We are all Keynesians now? - U2 Feedback

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Old 11-22-2008, 09:05 PM   #1
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We are all Keynesians now?

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In any normal circumstances, the new-found Tory zeal for fiscal restraint and small government would be splendid. But we are not in normal circumstances.

If this crisis is botched by the major powers – as the lesser crisis of 1930-1931 was so botched by politicians stuck in a mould – we risk a self-reinforcing spiral into devastation. We have no responsible choice other than backing Gordon Brown’s largesse in the pre-Budget report tomorrow, and more later no doubt.
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The transmission mechanism of monetary policy has broken down even more swiftly and violently than it did in the early 1930s. The juice is not getting through. Or, to borrow a phrase from that erstwhile monetarist John Maynard Keynes, central banks are pushing upwards on a dangling string.

Hence the IMF has ditched half a century of fiscal orthodoxy and called for a global spending blitz equal to two per cent of world output, or $1.25 trillion. We are all Keynesians now. There are no atheists in a foxhole, and no ideologues in a liquidity trap.

Iceland, Pakistan, Ukraine, Hungary, Belarus, Serbia and Latvia are in the arms of the IMF, and a long list of countries are near tipping point. Argentina has reverted to Peronist type, seizing the private pension system.

The benign global order of the post-Cold War – what Francis Fukuyama claimed was a triumph of liberal moderation – is fraying fast. We have lost Russia, where the interior ministry is already mobilising “anti-crisis units” to stem unrest, and journalists face prosecution for reporting economic news.

In China, rioters have run amok in Longnan, torching a section of the city in hand-to-hand street fights with the police. Yin Weimin, the human resources minister, warns that the coming tsunami of job losses poses a serious threat to China’s social stability. Beijing is taking no risks. It is spending a colossal 14 per cent of GDP on a fiscal rescue plan. Japan is letting rip, too, and even Germany has woken from its trance.

This is now official world policy, nota bene. The G20 bloc of leading states signed off on plans for a universal fiscal boost at the Washington summit. Quite right, too. The lesson of the 1930s is that countries trying to reflate alone are punished by capital outflows, forcing them to retrench.



http://www.telegraph.co.uk/finance/c...wns-blitz.html
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Old 11-22-2008, 09:49 PM   #2
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We've been for a long time.

Even Harper in Canada got convinced by Economists influenced by Krugman to go into a deficit. Now the liberals are sharpening their knives to attack him when he does. Oh well at least the G-20 decided not to increase trade barriers and Harper signed a trade deal with Colombia despite Obama being against it. Not all is bad.
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Old 11-22-2008, 09:51 PM   #3
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Oh well at least the G-20 decided not to increase trade barriers and Harper signed a trade deal with Colombia despite Obama being against it. Not all is bad.
I agree that this is encouraging.
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Old 11-24-2008, 09:16 PM   #4
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*elevation
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Old 11-24-2008, 10:00 PM   #5
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*elevation
What?

YouTube - U2 Elevation Live At Slane Castle
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Old 11-25-2008, 12:05 AM   #6
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It's rather unfortunate that we are.

I'm more of a Hayek person. Let the market sort itself out. It can be a beautiful machine when it's left untouched.
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Old 12-06-2008, 07:35 PM   #7
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Deflation virus is moving the policy test beyond the 1930s extremes - Telegraph

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We are beyond the extremes of the 1930s. The frontiers of monetary policy are being pushed to limits that may now test viability of paper currencies and modern central banking.

You cannot drop below zero. So what next if the credit markets refuse to thaw? Yes, Japan visited and survived this policy Hell during its lost decade, but that was a local affair in an otherwise booming global economy. It tells us nothing.

This time we are all going down together. There is no deus ex machina to lift us out. Certainly not China, which is the most vulnerable of all.

As the risk grows, officials at the highest level of the British Government have begun to circulate a six-year-old speech by Ben Bernanke – at the time of its writing, a garrulous kid governor at the US Federal Reserve. Entitled Deflation: Making Sure It Doesn’t Happen Here, it is the manual of guerrilla tactics for defeating slumps by monetary means.

“The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost,” he said.



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Monetary stimulus is a better option than fiscal sprees that leave us saddled with public debt – the path that nearly wrecked Japan.

Yes, I backed the Brown stimulus package – with a clothes-peg over my nose – but only as a one-off emergency. Public spending should be a last resort, as Keynes always argued.

Of course, Bernanke should not be let off the hook too lightly. Let us not forget that he was deeply complicit in creating the disaster we now face. He was cheerleader of Alan Greenspan’s easy-money stupidities from 2003-2006. He egged on debt debauchery.

It was he who provided the theoretical underpinnings of the Greenspan doctrine that one could safely ignore housing and stock bubbles because the Fed could simply “clean up afterwards”. Not so simply, it turns out.

As Bernanke said in his 2002 speech: “the best way to get out of trouble is not to get into it in the first place”. Too late now.
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Old 12-06-2008, 09:32 PM   #8
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We live in interesting times.
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