Have a look on the link below,
'Krugman living in parallel universe'
The purpose here is not to defend either Krugman or Ferguson but to keep away the looming threat of a longer recession in the mind of the people that the Government is not much constrained to put the economy back on it usual track- higher employment. The call for a Balanced Budget which became imbalanced due to higher consumption in the past periods at a time when people are reluctant to show what they have got for the economy –consumption or savings- due to the insecurity they feel about the condition of the economy is averse to the common knowledge in which investment, government and/or non-government, and production rise to increase the level of employment. Here, the multipliers, employment and investment, work to result in higher employment and investment, and a higher rate of growth. The inflexible attitude of fine tuning the economy’s budget and advocating a balanced-budget at a time when people, market and the Government all are resource crunched and money supply took the route of international trade and exchange markets instead of domestic markets will be like cutting the branches on which your sitting at the moment. Fiscal consolidation not aimed at improving economy’s health and only for improving balance sheets is not a good idea. We should not forget that the US’ social safety nets like unemployment benefit have only saved it so far, whatever little. The purpose of any economic system is not to make living conditions of its in-habitants worse rather it aims at improving them.
Although America pursued an aggressive monetary policy in the past but I do not think its purpose was to create a Great-Recession. Actually, recessions and depressions are general features of a capitalist economy and the US is no exception. This is happening since the Great- Depression, we can easily see the US falling in recessions every 5-10 years since 1930s. We live in a diplomatic WORLD and things are not as straight as they appear and every country has the right to make choices that increase the well being of its people, even if it is in the form of lower prices. Prices rise and fall in the US every 5 years; they are neither increasing continuously nor decreasing continuously. The reasons may be political, you can not deny, but since the US is a big importer too, its actions affect international prices, they rise and fall, too. America has never been a colonial power but its policies, not only the recent, throughout its history have been around scarce resources like oil. When recession broke prices, especially oil, went down and it helped all the oil importing countries because oil prices fell globally. The only thing that goes against America is the way loans were distributed. They were full of short-comings and were below the standard lending practices.
In case of monetary expansion in the US there is not much to do since interest rates are already near zero. The alternative left to the US is to set higher inflation targets and print some currency to fund production activities, public or private, in order to boost employment and demand. And, the decline of Gold-Standard makes a case for such an action. Countries have resorted to policies like increasing income to have a hold on scarce resources in face of rising inflation and a currency redenomination, later. Thus, if the US chooses to inflate its market by printing currency it does not seem to be a bad idea. Moreover, the US can also decide to pay its debt with the same money. It has happened before. But one problem may arise, after all, increase in imports. How the US is going to handle deterioration in its balance of payments situation?? Nationalism instead of protectionism may help here. BUY AMERICAN!!! Or the US can invite China to make investment in America especially in manufacturing following Paul Krugman’s 1991 paper, “Increasing returns and Economic Geography”, if demand tends to be larger in the US. It will benefit both the countries in terms of foreign exchange, transport- cost, investment, and un/employment.
As far as structural unemployment is concerned it is more due to the cost cutting behavior of the firms. Firms are on a hunt to find multi-skilled people so that they have to pay less in face of recession for the same services by consuming same amount of labor. Nevertheless firms will always try to maximize their returns on investment. Is it really a problem? Very recent in discussion...
Let us be hopefull!!!!!!!!!!
'Krugman living in parallel universe'
The purpose here is not to defend either Krugman or Ferguson but to keep away the looming threat of a longer recession in the mind of the people that the Government is not much constrained to put the economy back on it usual track- higher employment. The call for a Balanced Budget which became imbalanced due to higher consumption in the past periods at a time when people are reluctant to show what they have got for the economy –consumption or savings- due to the insecurity they feel about the condition of the economy is averse to the common knowledge in which investment, government and/or non-government, and production rise to increase the level of employment. Here, the multipliers, employment and investment, work to result in higher employment and investment, and a higher rate of growth. The inflexible attitude of fine tuning the economy’s budget and advocating a balanced-budget at a time when people, market and the Government all are resource crunched and money supply took the route of international trade and exchange markets instead of domestic markets will be like cutting the branches on which your sitting at the moment. Fiscal consolidation not aimed at improving economy’s health and only for improving balance sheets is not a good idea. We should not forget that the US’ social safety nets like unemployment benefit have only saved it so far, whatever little. The purpose of any economic system is not to make living conditions of its in-habitants worse rather it aims at improving them.
Although America pursued an aggressive monetary policy in the past but I do not think its purpose was to create a Great-Recession. Actually, recessions and depressions are general features of a capitalist economy and the US is no exception. This is happening since the Great- Depression, we can easily see the US falling in recessions every 5-10 years since 1930s. We live in a diplomatic WORLD and things are not as straight as they appear and every country has the right to make choices that increase the well being of its people, even if it is in the form of lower prices. Prices rise and fall in the US every 5 years; they are neither increasing continuously nor decreasing continuously. The reasons may be political, you can not deny, but since the US is a big importer too, its actions affect international prices, they rise and fall, too. America has never been a colonial power but its policies, not only the recent, throughout its history have been around scarce resources like oil. When recession broke prices, especially oil, went down and it helped all the oil importing countries because oil prices fell globally. The only thing that goes against America is the way loans were distributed. They were full of short-comings and were below the standard lending practices.
In case of monetary expansion in the US there is not much to do since interest rates are already near zero. The alternative left to the US is to set higher inflation targets and print some currency to fund production activities, public or private, in order to boost employment and demand. And, the decline of Gold-Standard makes a case for such an action. Countries have resorted to policies like increasing income to have a hold on scarce resources in face of rising inflation and a currency redenomination, later. Thus, if the US chooses to inflate its market by printing currency it does not seem to be a bad idea. Moreover, the US can also decide to pay its debt with the same money. It has happened before. But one problem may arise, after all, increase in imports. How the US is going to handle deterioration in its balance of payments situation?? Nationalism instead of protectionism may help here. BUY AMERICAN!!! Or the US can invite China to make investment in America especially in manufacturing following Paul Krugman’s 1991 paper, “Increasing returns and Economic Geography”, if demand tends to be larger in the US. It will benefit both the countries in terms of foreign exchange, transport- cost, investment, and un/employment.
As far as structural unemployment is concerned it is more due to the cost cutting behavior of the firms. Firms are on a hunt to find multi-skilled people so that they have to pay less in face of recession for the same services by consuming same amount of labor. Nevertheless firms will always try to maximize their returns on investment. Is it really a problem? Very recent in discussion...
Let us be hopefull!!!!!!!!!!
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