PKT message, Re: The Gathering Storm

James Cumes wrote 11 October 2002
[quote]
The terrifying thing for you and me is that we are going into this crisis, right now, in much worse shape than we did at the time of the Great Crash in 1929.

In our discussion on 8 October, Dr Richebächer and I noted several contrasts, including that the United States was the world's greatest creditor in 1929 and is now the world's greatest debtor; that real capital investment had then been high but, during the 'nineties and up to the present, it has been disastrously low; that the United States had a large trade surplus in 1929 but now has a trade deficit unmatched by any other country at any other time.
And so it goes on
[end quote]

COMMENT: Could one not argue, along a more optimistic line, that the world economic system of 2002 has more built-in stabilizers than the world economic system of 1929 had? For example, (a) in OECD countries the share of public sector budgets in GDP is greater in 2002 than it was in 1929, which might have a stabilizing effect. {I believe that this share was also smaller in the USSR in 1929, before Stalin's mobilization starting in 1933, than it is in modern USA or EU.) (b) The erroneous doctrines of global neoliberalism, notwithstanding, there is greater understanding of the dangers of deflation in 2002 than there was in 1929. And macroeconomic management was generally less well developed in 1929. (c) The ruling classes of the world, from Saudi Arabia and Latin America to Japan and back to Western Europe, have invested so much wealth in the United States that they have a self-interest in keeping the value of the US dollar strong [much to the chagrin of Dr. Liu]; that might also have a stabilizing effect. No?

Gert