Sent: Friday, July 04, 2008 11:33 AM
Subject: [Longwaves Forum]Re:Debt Deflation BIS Report
2005
This BIS piece tends to give a grossly misleading
impression, in that it draws no distinction between the two periods which have
marked the post-WW2 period, the first between 1945 and 1969/71 and the second
after 1971; and, in failing to draw this distinction, it tends to place the
blame for inflation and the increase in indebtedness on "automatic
stabilisers" and the "welfare state."
This is mischievous. The automatic stabilisers
and the extraordinary benefits that flowed from the welfare state were undone
by the errors, in both macroeconomic and business reasoning, committed
in and after 1969 by the Nixon Administration and the Federal Reserve
Board and their successors.
Policies then adopted guaranteed that there would
be inflation and that the welfare state would be accused of being a major
cause of it. Largely as a consequence and bearing in mind particularly
the irresponsible policies of the 1980s and afterwards in the cult of the free
market and small governmwent, the welfare state has survived only in
diminished form and the economic stability and growth - in REAL terms -
of the period from 1945 to 1969 has vanished in feverish speculative greed
which has spread around the world.
Since this is the Fourth of July, it is
appropriate to note that the policy errors and indeed the errors of
theoretical economics which have marked the period after 1969 have diminished
the power of the United States itself - enormously in relative terms and in
some respects even absolutely.
It will be only if the United States, hopefully
through its democratic institutions but especially through the good sense and
strong will of its people, can resolve the complex of economic and financial
problems which they have inflicted on themselves in the last forty years, that
the United States will stand a chance of regaining its former status in every
respect - socially, economically, politically and strategically.
We cannot be sure - we can only hope - that, as
the extent of the present financial catastrophe becomes manifest, a realistic
review and reappraisal of the policies of the past forty years will
NECESSARILY be made and policies swiftly formulated
which will deliver us from the miseries - and the enormous security
dangers - which currently confront us.
The changes will have to be fundamental and
widespread and, inevitably, they will take time to implement. We can only pray
that the global political and strategic environment will permit a peaceful
transition to safer and more prosperous times.
James Cumes
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