FW: pkt seminar on the economics of the crisis

["Harry Veeder" <eo200@xxxxxxxxxxxxxxxxxxx>]

----------
>From: William F Hummel <wfhummel@xxxxxxxxxxxx>
>To: pkt@xxxxxxxxxxxxxxxx
>Subject: Re: pkt seminar on the economics of the crisis
>Date: Sun, Sep 23, 2001, 6:51 PM
>

>Scott Simpson wrote in part:
>
>>Now to the major problem.  In ordinary times, if such times truly exist, such
>>a stimulus might prove useful over the long term.  In the real short term
>>however, the propensity to spend is at a basic level for most Americans. Even
>>more important, there is no demand for true investment, meaning investment
>>that creates jobs via capital spending. Perhaps defense industries might
>>enjoy some outfall from our current situation, but even that is open to
>>question given the type of "war" that would be needed to truly control
>>terrorism.
>
>I cannot agree that the solution to our current economic problems
>lies in more investment at this time.  There is not now and
>seldom has been a lack of capital available for investment.
>Rather there is a glut of productive capacity throughout the
>industrialized world.  What we now lack is effective purchasing
>power, not a plan to increase investment.  The problem is one of
>demand, not supply.

There is a glut of productive capital in the most developed countries.
Rather than increase "demand" to absorb this glut, (and continue
to increase levels of stress with excessive work) let these gluts
shrink by selling off the productive capital at reduced
prices to countries lacking it.



>At least in the US, the private sector has been on a binge that
>created unprecedented credit market debt, far in excess of the
>its ability to service through current income.  The bubble in
>asset prices that developed in the US was bound to burst, just as
>the Japanese bubble in real estate prices did in the late 1980s.
>One of the things that must be done is to develop intelligent
>controls on how we leverage ourselves in the future.  That is a
>monetary issue requiring a political solution.  Unfortunately the
>grotesque casino that we call the financial industry holds most
>of the cards.  In some respects, it IS the problem.
>
>We appear be caught in a downward spiral of unemployment feeding
>on itself.  This is basically a crisis of confidence where
>self-interest and survival are the dominant motivation.

Western communities are under stress. This is a fact
documented by psychologists and it is not like the pressures
of the 1930's.


>I offer
>no specific solution for breaking this vicious circle, but it is
>clear that it cannot be done without the intervention of the
>government.  As horrible as the WTC attack is to us all, it
>should prove helpful in ending a misguided fiscal policy.  We no
>longer hear talk of paying down the debt.  Let's hope however
>that our system does not become forever dependent on military
>Keynesianism.
>

If the key to our prosperity lies purely with Keynesian
stimulation, I fear history will repeat itself. The signs and signals
are everywhere that a new comprehensive, coherent, consistent theoretical
macroeconomics is needed.

Harry Veeder