Ed and Harry, May I intervene in your exchange? I've also changed the name of the thread for my own comment:
(HP) <<<< The present campaign, asking us to spend our way out of recession is nothing short of ludicrous - unless your controlled economy is coming apart at the seams and you'll try anything - absolutely anything. >>>> (EW) <<<< Why is it ludicrous? Roosevelt tried it during the 1930s. Wartime spending ended the Great Depression. Post-war spending on reconstruction accounted for the boom that lasted into the 1970s. The economy was pretty active during the recent fibre optic and dot.com run-up. When money circulates, goods move and production and employment rise. >>>> But surely, Ed, the wartime and post-war reconstruction spending was an enormous stimulus, far beyond anything that even a fanatical Keynesian government could or would do in peacetime. And, of course, there was a price to be paid for it all -- rampant inflation during in the 60s and 70s. I'm fascinated by how so many commentators (usually economists employed by investment funds, mutual funds, stockbrokers, and the like who want to drum up business) are now saying that, because the American consumer spending went up by 7% last month, then we're now through the worst, and that all will be booming again before too long. They conveniently forget that significant numbers of American house-buyers have been re-mortgaging theri homes at new, lower rates and thus gaining extra spending power, taxpayers have been receiving large tax cuts and, in the past month, car makers have launched cut-price and zero-interest schemes in order to shift cars from their inventories. Steering the economy -- which is what governments have been trying to do during the whole course of the last century since they nationalised their currencies -- only really amounts to swinging between one long crisis and another. Our parents suffered a long period of massive deflation in the 20s and 30s (after which the poverty trend line didn't stabilise to low levels until 1970) and then, after another intervening world war, a period of massive inflation in the 60s and 70s. These changes are far more extreme than the normal sorts of self-correcting trade cycles which characterised the 19th century. My guess is that we're now heading towards another long period of deflation. Trying to control the economy by means of small changes in the interest rate is quite unlike driving a car, whereby small movements of the steering wheel produce immediate changes in direction. Interest rate changes actually produce long-delayed changes rather like the effect of the tiller in a slowly moving barge. Because of the apparent non-effect of a small touch to the tiller, the novice helmsman usually makes a succession of small changes -- and then finds, after a delay, that the barge changes direction straight into the bank! Keith ___________________________________________________________________ Keith Hudson, General Editor, Calus <http://www.calus.org> 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________
