Here's a depressing analysis:
http://www.economist.com/finance/displaystory.cfm?story_id=13110352
The threat is deflation, as experienced in the Great Depression and by Japan in the last 20 years. It has a major depressive influence on economic activity and it is far more difficult to shake than high inflation. Japan has yet to beat it. America only succeeded in overcoming it after 12 years when it entered WWII and enormous government spending primed the economy to achieve its full potential. Our rulers are too stupid and too cowardly to take decisive measures against this threat--we are dependent upon time and luck to prevail. To be sure, before the welfare state was erected, we could afford to let deflation take its course. Having undertaken this burden, which grows ineluctably regardless of the resources available to fund it, we cannot afford to allow deflation and the economic contraction likely to follow in its wake.
The threat is deflation, as experienced in the Great Depression and by Japan in the last 20 years. It has a major depressive influence on economic activity and it is far more difficult to shake than high inflation. Japan has yet to beat it. America only succeeded in overcoming it after 12 years when it entered WWII and enormous government spending primed the economy to achieve its full potential. Our rulers are too stupid and too cowardly to take decisive measures against this threat--we are dependent upon time and luck to prevail. To be sure, before the welfare state was erected, we could afford to let deflation take its course. Having undertaken this burden, which grows ineluctably regardless of the resources available to fund it, we cannot afford to allow deflation and the economic contraction likely to follow in its wake.
No comments:
Post a Comment