"With underlying productivity rising, stagnation means ever-growing unemployment. This is something that the United States will not tolerate after its experience of the 1930's. In the last resort, monetary and fiscal orthodoxy would be abandoned to the extent necessary to stimulate demand. And in contrast to Japan (where the United States has been opposed to a low yen), there would be no Big Brother standing in the way of the necessary currency depreciation."
BTW, the above also accords with my view of the so-called "neoliberalism" - from the mouth of an actual "neoliberal" (although Brittan is probably an old-time classical British liberal).
The most questionable thing in the whole document is the assumption of great productivity strides as a result of investment in the producer products generated by "high technology". The date of the article - Jan. 2001 - is noteworthy, as it was only subsequentially that the extent of overinvestment, by both the buyers and "high tech" industry itself, became truly evident. It would be interesting to look at the rationale of the NY Fed report cited in the article with respect to productivity gains.
And central bank rate manipulations can only explain short term phenomena, such as the depth of a recession or the rate of current gdp growth in an expansion. But the issue under discussion is whether the US could fall into a decade long stagnation a la Japan (I think not, because the US is the hegemon, in short) and Japan's stagnation cannot be explained by the actions of the BoJ at the beginning of that period.
And isn't that basically what Nixon did in the early 1970's when he took the US dollar off the $35/gold ounce peg?
-Brad Mayer Oakland, CA
>- --- Seth Ackerman <SAckerman at FAIR.org> wrote: > Doug Henwood
>wrote:
> >
> > > Like I said before, though, one big difference is that the
> > BoJ kept
> > > raising rates for over a year after the Japanese stock
> > market peaked
> > > on the last trading day of 1989; the Fed has been easing
> > pretty
> > > aggressively.
> > .
> >
> > We'll see if that continues to be the case in the event the
> > dollar takes a
> > major hit.
> >
> > Seth
> >
>
>More like -- we'll see if that continues to be the case in the
>event that the dollar *doesn't* take a major hit. Whatever the
>solution is for the US economy, it shurely has to involve a
>sharply lower external value of the greenback, given the
>current a/c deficit. After all, what's the point in _being_ a
>global hegemon if you can't use that muscle to carry out the
>odd inflation-default from time to time?
>
>dd