The auto industry: formula for economic recovery
Mark Anderson
October 28, 2008
Polticians, central planners, and mainstream economists get everything backwards
As I explained in this 2006 commentary, prevailing economic orthodoxy inverts the trade cycle. What we are living through today bears witness to that.
Inflation does not mitigate a balance-of-payments deficit, but creates one by making domestic goods comparatively more expensive. This nurtures dependency upon cheaper foreign markets to supply goods.
Mainstream economists are supporting monetary and fiscal stimulus to "solve" our "liquidity" problem, when it was too much "liquidity" (i.e., inflation) that precipitated the mess we are in today. More monetary and fiscal shock, trying to make the insolvent solvent, will only prolong the problem by not allowing the market to adjust.
At the same time people are advocating more monetary and fiscal shock, U.S. auto sales are in a slump and the International Monetary Fund is encouraging China to buy up its gold reserves. Do you understand this? The previous inflationary orgy created an outflow of real money, because that is where our "liquidity" went.
Is there not one other person who sees something wrong with this? We have an excellent opportunity to solve the "liquidity" problem, reverse the negative balance-of-payments, keep the dollar from dropping like a rock, boost auto sales, and allow the market to recover - if only politicians and Bernanke would get out of the way. How? Negotiate trade deals with China, in which we become an....exporter again.
I would like to know what the IMF is going to do with all of those U.S. dollars, other than try to prop up failing regimes, through bailouts. Again, more of the same problem. The more government and central planners try to make the insolvent solvent, the worse the problem becomes. The free market, if allowed to function, is amazingly resilient and can self-correct. The government has been making things worse, and now the IMF is making things worse by trying to soak up excess "liquidity" in China.
As I explained in this 2006 commentary, prevailing economic orthodoxy inverts the trade cycle. What we are living through today bears witness to that.
Inflation does not mitigate a balance-of-payments deficit, but creates one by making domestic goods comparatively more expensive. This nurtures dependency upon cheaper foreign markets to supply goods.
Mainstream economists are supporting monetary and fiscal stimulus to "solve" our "liquidity" problem, when it was too much "liquidity" (i.e., inflation) that precipitated the mess we are in today. More monetary and fiscal shock, trying to make the insolvent solvent, will only prolong the problem by not allowing the market to adjust.
At the same time people are advocating more monetary and fiscal shock, U.S. auto sales are in a slump and the International Monetary Fund is encouraging China to buy up its gold reserves. Do you understand this? The previous inflationary orgy created an outflow of real money, because that is where our "liquidity" went.
Is there not one other person who sees something wrong with this? We have an excellent opportunity to solve the "liquidity" problem, reverse the negative balance-of-payments, keep the dollar from dropping like a rock, boost auto sales, and allow the market to recover - if only politicians and Bernanke would get out of the way. How? Negotiate trade deals with China, in which we become an....exporter again.
I would like to know what the IMF is going to do with all of those U.S. dollars, other than try to prop up failing regimes, through bailouts. Again, more of the same problem. The more government and central planners try to make the insolvent solvent, the worse the problem becomes. The free market, if allowed to function, is amazingly resilient and can self-correct. The government has been making things worse, and now the IMF is making things worse by trying to soak up excess "liquidity" in China.
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