As the history of America's Great Depression is one long regret of political follies and blunders that aggravated the suffering, so is the story of the Japanese recession from the 1990s to the present. The Japanese government tried to spend its way out of the recession, but instead merely prolonged it and created a mountain of debt.
Economists are fond of writing open letters to politicians in attempts to lead them down "proper" policy paths. In 1930, a thousand economists signed an open letter to President Herbert Hoover asking him not to sign the infamous Smoot-Hawley Tariff. Hoover signed it anyway, creating one more disastrous policy mistake that ultimately created the Great Depression.
According to the popular view, the revival of some important economic indicators has raised the likelihood that the aggressive lowering of interest rates by the Fed will invigorate the economy. The irony is that the very same loose monetary policies that are expected to energize the economy in fact undermine its main source of strength.
In attempting an outlook for the year ahead--and those of the Austrian School firmly believe all such endeavours are an exercise in futility--Sean Corrigan sets out a brief theoretical framework, predicting likely market phenomena and official policy actions, and presenting factors that could derail his predictions.
In its original meaning, "crisis" signifies a turning point that can either lead to improvement and recovery or to more severe deterioration. In the case of Argentina, with the future of the Argentinean people in mind, one must hope for the abandonment of its interventionist economic system, with its reliance on a bureaucratic apparatus and its self-chosen dependency on foreign credits.
Since it takes some time to say for sure that we are in recession, by the time we know we are in recession, we are already most of the way through it. This time, it took eight months--from March until November 2001--to determine we were in a recession. Here we are, in December 2001, and there are some signs that we may soon start to recover.
Economies do not subside because demand wanes--we could all use a shiny new car, or a beautiful new house pretty much any time. However, in a world where means, unlike wants, are not infinite, we have to be able to offer something in exchange. We do that by first profitably producing things other people require, at a price they are willing to pay, not by stamping our feet and making demands like a petulant 5-year-old.
Making the boom continue at home and abroad has been the prime focus of U.S. monetary policy for quite some time. But among the unintended consequences emerge the broadly based lowering of perceived risk levels in the financial markets and a global spread of careless investment activities.
The publication of David DeRosa's latest book is all the more timely given the financial crises and stock market crises that littered the 1990s. The problem with DeRosa’s book, however, is that his solution offers no hope for stabilizing the system. Nicolas Bouzou reviews In Defense of Free Capital Markets.
Prior to the Keynesian era, recessions were called panics and had durations of about three months. The shortness in duration reflected the lack of interventionism by extra-market authorities. Today, recessions last much longer, as the bad idea that the state should manage the economy has become legitimized.
