PKT message, Quo Vadis 2003?

The following message to Gang8 may be of interest:

Here is something which I have been wondering about:

After 20-30 years of crediting New Economy Speak, the free-spending, economy-sustaining U.S. Baby Boomers have had the scare of their lives in the form of collapse of share values, corporate sleaze, and vanishing pension rights during the past couple of years.

This leaves U.S. economic policy makers with few or no good options.

1. Low interest rates may move traumatized Baby Boomers to refinance their mortgages - and put the savings away for rainy days down the road.

2. Offers of increased consumption credit may find few takers among Baby Boomers.

3. Monetary policy has little or no direct bearing on the perceived need for belt-tightening by state governments facing huge - and rising - fiscal deficits.

4. Fiscal policy is locked into (a) tax relief, (b) rising military expenditures, and (c) cutbacks in other expenditures in the name of fiscal responsibility.

5. In view of 1 - 4, the corporate sector may remain in wait-and-see mode insofar as new investment and job creation is concerned.

In the final analysis, all these factors are rooted in U.S. monetary policy in the post-Bretton Woods era, whose advent was welcomed by mainstream and monetarist economic scholars alike - who now remain silent on the need for structural monetary reform and/or prescribe renewed monetary inflation as antidote to the consequences of the monetary inflation of the past thirty odd years.

When we first made contact in the late 1980s, I advised Geoffrey and Chris that, in my view, post-Bretton Woods world monetary arrangements were a "house of cards" destined to come "crashing down".

Might 2003 have some such 'surprise' up its sleeve?

Gunnar