Re: Monday's WSJ Front Page and pg 15-triumph of the GT?

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

The catch is that the WSJ reports views not truth.  It feels no
obligation to reconcile opposing views in a complex world. Take today's
front page: the lead report in What's News states: A strong dollar could
push Europe's economy closer to recession while aiding US firms; and
another front page headline: US dollars slide could push Europe closer
to a recession.

When the dollar goes up, Europe goes into recession.  When the dollar
goes down, Europe goes into recession.  What the WSJ did not report is
when the dollar stays the same, Europe goes into recession.  The irony
is that the three prospects are all valid.  It's just that recession
will come from diffferent sectors and directions in the European economy
in each of the three possible conditions.  General Motors, IBM, and the
like will face problems if the dollar rises, falls, or stays the same,
albeit only different problems. The same dilemma with multinationals
that has to file their quarterly report in euros or yen, but with
different problems. One of the paradoxes of globalization is that the
global economy is boxed into a no win paralysis for everyone.

But volatility is now a structural profit center.  It gives life to the
market, incentives for trade and keeps trading profitable. The yo-yo
economy needs ups and downs, and as long as the downside does not hit
the ground, the performance will appear spectacular.  But the financial
system is now disconnected from the economic system, if not totally at
least with highly elastic connections. And the danger of collapse will
come from the financial system, not the economic system.  A financial
collapse will create more unemployment, not the other way around.

Henry C.K. Liu

Clifford Poirot wrote:
> The front page and page 15 of Monday's WSJ are well worth a look and of some
> considerable interest to Post-Keynesians. Here is a brief synopsis:
>
> "Caution: Tax Cuts Are Bigger Than They Appear in Budget" : While there is
> some disagreement on this list over the desirability of tax cuts and
> deficits, I don't think anybody on this list would approve of Bush's long
> held strategy of using mirrors and gimmicks to redefine the size of the tax
> cuts. This article pretty much directly accuses Bush of lying and hypocrisy.
>
> "Newly Defined "strong dollar" Signals U.S. Shift": Now this one made me
> almost burst out into raucous laughter and roll on my office floor-a "strong
> dollar" policy is no defined by Treasury Secretary John Snow as "general
> public confidence" and "difficulty to counterfeit". Perhaps it can be used
> in Bounty commercials too-a comparison test between the dollar and the Euro?
> Which one will hold up when wet...?. Again, clearly we have some differences
> on this list about the advisability and meaning of the current dollar
> devaluation. And again, regardless of what one thinks about this (I'm in
> favor) I wonder why is the Bush administration resorting to redefining terms
> rather than admitting what is going on?
>
> I think it is significant politically that a paper that has practically
> become the Republican Party propaganda page, takes Bush to task (far more
> than the NYT has been willing to do) for his verbal sleight of hand on two
> significant economic issues.
>
> More interesting from a theoretical point of view is the FED's new found
> concern on the problems of deflation "Having Defeated Inflation, FED girds
> for New Foes: Falling Prices". Follow the story to page 8 where the IMF now
> says we need to prevent deflation, rather than fighting it.
>
> So there we have it-the WSJ, the FED and the IMF warning us against the
> dangers of deflation and frank admissions that falling prices don't bring
> the economy back to full employment. It's as if I woke up on some bizarre
> parallel universe where the WSJ excoriates Bush and the FED and the IMF take
> the GT seriously. There's got to be a catch somewhere.