By defaulting on one loan, Argentina may be acknowledging that no country ever became wealthy depending on public financing organizations from another hemisphere. One can hope. Such ideas can lead to economic sovereignty and wealth creation. Such ideas, if spread, can cause industrial revolutions.
The Federal Reserve System may have run out of room to maneuver. Facing a looming recession, it resolutely lowered its discount rate and frantically expanded its credits. Eager to stimulate the sagging economy, it enabled and encouraged businessmen to invest more and consumers to go ever deeper into debt. Yet the specter of recession refuses to fade away.
Many pundits have attempted to diagnose why such a wave of scandals and record bankruptcies occurred when it did. Most suggestions fail to address underlying causes. The real lesson of Enron, argue Steinreich and Oglesby, is that significant corporate corruption will end when one-party rule of corporate America does. Until then, expect more Enrons.
here are those who want to believe that a market economy is itself unstable, prone to periods of excess and in need of stabilization by some outside authority. As Jeff Madrick wrote recently for the New York Times, “government itself is a necessary bulwark against recession.”
As the markets continue to wallow in bear territory, and as consumer—and, more important, investor—confidence falls, writers and commentators of all stripes have weighed in to give their two cents’ worth concerning the key question: who or what is at fault?
Facing a looming recession, the Federal Reserve resolutely lowered its discount rate and frantically expanded its credits. Eager to stimulate the sagging economy, it enabled and encouraged businessmen to invest more and consumers to go ever deeper into debt. Yet the specter of recession refuses to fade away. What is the Fed to do?
What we see in Japan has nothing to do with the mythical liquidity trap, writes Frank Shostak, and everything to do with an explosion in debt, a reckless monetary policy, and tight government controls of businesses via the ministry of trade and industry. To put it bluntly, the Japanese have been depriving themselves of real funding in return for American government promises to repay the debt.
The alarm raised by mainstream economists that corporate cost cutting will undermine the real foundation of the economy is based on a flawed view of the essence of savings. On the contrary, writes Frank Shostak, cost cutting is an important means in correcting previous erroneous decisions so that real wealth can be generated again.
