Keith, it would be nice for the world to have a common currency whose value is
invariable because it is based on a valued substance like gold, just as it
would be nice to have a world that is peaceful and nicely settled into economic
patterns that vary little from year to year or even from decade to decade.
However that is not the world we have. Countries vary greatly in terms of
stability and the economic problems they face. A stable country one year may
be less stable the next. Monetary policy during periods of stability may need
to differ considerably from monetary policy during periods of instability and
each country will have to make decisions on what kind of monetary policy it
should pursue at a particular time. Having a common currency whose value is
based on gold or another currency will inhibit the kind of action a country may
need to take.
The Euro provides and example of the kinds of problems a common currency can
raise. There is now considerable economic variation among the countries of the
European Union. Some are doing quite well, others are facing large debts and
unemployment. Yet the latter cannot take the kind of action that may be
necessary because being tied to a "common good" can't permit it. I wouldn't be
surprised to see the EU begin to disintegrate before too long.
Control of national currencies is not only important for internal purposes, it
can as I mentioned previously also be used strategically in international
trade. China keeping the renminbi low for trade purposes is an example.
So, I agree that a stable common currency would be nice to have, but then so
would a nice, quiet, stable and peaceful world.
Ed
----- Original Message -----
From: Keith Hudson
To: Ed Weick ; RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION
Sent: Monday, August 02, 2010 10:18 AM
Subject: Re: [Futurework] Usual Krugman rant
Ed,
At 09:17 02/08/2010 -0400, you wrote:
Who's ranting? When it comes to employment, I don't see it as being
primarily about mass producing consumer goods. There are many things that
could be done to get people working and a Keynesian approach would probably be
needed to get them to be done. American cities, roads, bridges and other vital
pieces of infrastructure need to be rebuilt.
Try it if you want. But Japan tried heavy Keynesian spending for a decade and
somewhat less in the following -- but they were no better off after 20 years
than at the beginning.
Doing this might not employ all of the unemployed, but those who would have
work would spend a lot more money on groceries, housing and other things they
can't afford right now. Small businesses would benefit, multipliers would come
into play and at least part of the currently depressed American world would
reawaken. So, I tend to agree with Krugman -- bring Keynes back into the
picture and let's see what happens.
You'll get more of what we've had in the last 30 years -- declining real
wages for average people (at least for those in work).
Why, as Krugman argues, isn't government doing anything? It may be the
nature of the Obama administration. Obama's opponents sit there staring at him
and all he does is stare back at them. "Yes we can!!" is long gone. And so
much now is about the forthcoming elections. Being perceived to be doing the
right thing (really, doing nothing) will stand a better chance of getting votes
than doing something would be.
Raising tax revenues by getting people working could be important in terms
of dealing with the deficit. Eliminating tax breaks for the rich could also be
important. The European powers may be in a deflationary mode right now, but
why should America be?
And going back to some kind of gold standard arrangement is not the answer.
It simply wouldn't work. It didn't work in the past,
Can you tell me when and where it didn't work?
so why should it work in today's far more complex world.
The gold standard worked for England for 150 years and most of Europe for 80
on average and also for America for about 40 years -- all with no inflation
whatsoever. All was cut short by the First World War when so much money was
needed that it had to be printed. But then, later, when governments tried to go
back onto a gold standard they did so without taking the subsequent inflation
of the pound, dollar, mark, etc into account. Result? More inflation -- and
even more so after Nixon cut off even international trade surrencies from gold
in 1971.
As more and more Chinese, Middle East oil exporters and big investors' money
goes into gold and not dollars or government bonds, you can be certain that
gold, as currency, is quietly re-asserting itself. All the Western banks are
now grimly hanging onto what gold they still have because it's their only one
sure asset they have these days. It can only mean one thing. We're going to
revert to a gold standard -- or another reliable world currency -- sooner or
later, whether after yet another chaotic episode like 2008/9 or by
international agreement -- as China is calling for -- remains to be seen.
Keith
Ed
----- Original Message -----
From: Keith Hudson
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, ,EDUCATION
Sent: Monday, August 02, 2010 2:13 AM
Subject: [Futurework] Usual Krugman rant
Paul Krugman is off on a typical rant this morning in the New York Times.
He observes that unemployment will probably grow in the years ahead but says
that there is "growing evidence that governing elite just doesn't care?"
Of course they care! They care for their own skins in the coming years.
Every conceivable type of government cares about unemployment, and has done so
throughout history if it wants to maintain power and sleep easy.
Paul Krugman refuses to entertain the idea that high and growing
unemployment is structural. Why? Because, even after writing hundreds of
op-eds over the years, he still thinks that Keynesianism can supply the
solution. It might have done so in the 1930s when there was still a large
tranche of still-expensive consumer goods awaiting mass production and purchase
by a substantial proportion of the population. That's no longer the case.
There's no long line of desirable consumer goods visible ahead of us. As
regards existing goods, automation still proceeds.
So "Congress is sitting on its hands" is it? And the Fed is not
repeating inflation out of some sort of malignant obduracy, is it? (At least
there are some officials who learn from their mistakes!) What's needed is not
emotionalism on Krugman's part but some objective analysis in order to restore
his status as a Nobel prize-winning economist and not a tub-thumper.
Well, I'll give him some pointers. What we need -- and pretty soon, too
-- is a total currency reform so that all advanced governments can write off
their existing debts and not cripple our children and grandchildren with paying
for their profligacy in the past few decades. And, from then onwards, a
currency system that will make governments keep to sensible annual budgeting.
We also need a substantial educational reform so that there'll be a demand
pressure to expand or share the most interesting and highly-paid jobs. We also
need substantial administrative/political reform so that we don't have a system
whereby politicians have to selectively bribe this or that section of the
electorate in order to remain in power.
Keynes himself said something to the effect that governments always fall
prey to outmoded ideas of a previous generation of economists. Well . . . that
applies to economists, too.
Keith
Keith Hudson, Saltford, England
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Keith Hudson, Saltford, England
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