Kevin_Kennedy
Defend Liberty
- Aug 27, 2008
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Allowing a recession to do what it needs to do is not teaching anyone a lesson, it's simply allowing the recession to happen. Which is what needs to happen to help the economy.
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Allowing a recession to do what it needs to do is not teaching anyone a lesson, it's simply allowing the recession to happen. Which is what needs to happen to help the economy.
Case Studies of Recent Recessions in the UK
The recession of 1981 was caused by:
High strength of the pound which made exports more expensive and reduced AD.This recession particularly effected British manufacturing.
High interest rates, The govt was committed to reducing the inflation of 27% they inherited. They maintained a tight monetary policy which reduced inflation but at a cost of falling spending, investment and outpur.
Tight Fiscal Policy, To control inflation the govt were committed to reducing the levels of Government borrowing. This was influenced from Monetarist beliefs that controlling excess government borrowing was essential to the economy
The recession of 1991 was caused by
BOOM and BUST. In the 1980s economic growth was too fast and unsustainable therefore inflation increased, to reduce it the govt deflated the economy.
Joining the Exchange Rate Mechanism. The govt wanted to maintain a high value of the pound this required high interest rates of 15% which caused a big fall in AD.
Recession of 2008/09
Credit crunch - shortage of finance (Credit Crunch explained)
Falling house prices - related to shortage of mortgages and credit crunch
Cost push inflation squeezing incomes and reducing disposable income
Collapse in confidence of finance sector causing lower confidence amongst 'real economy'
Interesting points and persuasively put. I know what you mean about being pooh-poohed, I've done it myself. But has it ever been tried anywhere? The critics of socialism do the same thing but they can point to failed experiments without allowing for the fact that the failed experiments were twisted versions of socialism. I think your lot suffer from a bit of that but in a different manner.
In Australia we had our dollar pegged against the greenback at parity until 1983 when the Hawke Labor government came to power. They floated it. I can tell you that our economy went from being ossified to thundering along, almost overnight. The old, pointless, dead hand regulations were kicked out of the door and our economy loosened up. If Hawke and Keating (Treasurer) hadn't done that we'd have gone the same way as Argentina a little later. The old protections were removed and we faced the world and I have to say, it did us a lot of good. Yes we had a recession and at one point interest rates were skyrocketing (help me here, the idea of high interest rates is to fight inflation isn't it? Stop all that loose money slushing around?) and people were hurting. But it did cool down the economy and we successfully put a lid on inflation and avoided the horror of stagflation.
So, I'm not one to ask for regulation to protect us from the natural outcomes of our actions (individually or collectively), but I do believe in a well regulated market (but our financial watchdogs have been weakened by the previous government due to ideology and failed us although not in a truly spectacular fashion), the regulations being there for the insiders to adhere to so that there's as little skullduggery as possible.
Now, correct me please, but it seems to me that a central point of your argument (above) is that interest rates must be set by market forces and not subject to the command of a central bank. Is that correct? Here that isn't the case, the RBA (Reserve Bank of Australia) sets the rate although it is and it really is free of government control.
If I've got that right then that's an interesting point.
This has been a focal point of many of my posts and essays.Now, correct me please, but it seems to me that a central point of your argument (above) is that interest rates must be set by market forces and not subject to the command of a central bank. Is that correct? Here that isn't the case, the RBA (Reserve Bank of Australia) sets the rate although it is – and it really is – free of government control.