Patrician wrote:
Alan Greenspan in a recent speech says:
Quote:
If the pernicious drift towards fiscal instability in the United States and elsewhere is not arrested, and is compounded by a protectionist reversal of globalisation, the adjustment process could be quite painful for the world economy
Who to believe? Greenspan, or Gbaji?
I assume you are referring to
this speech?
Nothing in there counters what I've said.
First off. He's not talking about national debt at all. He's talking about trade deficit (which I've said several times is a completely different topic). Also, just like me, he's saying that the deficit, taken by itself, is not an indication of anything "wrong". It's about context and how governments (and people) react to those conditions that matters.
It's interesting that you chose to cut off the first half of that paragraph Pat. Did you honestly think I wouldn't notice:
EDIT: Hmmm... Given that you're quote is also a slight rewording of what was actually said (presumably to add to the impression that this is a separate statement and not tied to an earlier one), I'm suspecting that *you* didn't chop off the first half of the paragraph at all. It's likely that whatever source you obtained the quote from did. Which makes one wonder at the motives of doing so and should make one question how much they can trust a source that would alter the quote is *exactly* the right way to make this seem like a complete statement instead of just one half of a pair of conditions.
Just curious. BBC?
Quote:
If the currently disturbing drift toward protectionism is contained and markets remain sufficiently flexible, changing terms of trade, interest rates, asset prices, and exchange rates will cause U.S. saving to rise, reducing the need for foreign finance and reversing the trend of the past decade toward increasing reliance on it. If, however, the pernicious drift toward fiscal instability in the United States and elsewhere is not arrested and is compounded by a protectionist reversal of globalization, the adjustment process could be quite painful for the world economy.
He's presenting two cases. He's saying that if we (government in this case) try to react to current economic trends with protectionist measures, we may have a problem, but if we allow natural market forces to work (that's the whole "flexible markets" stuff he's talking about), then it's likely that the trend will reverse as the market naturally reacts.
He's not saying it's good or bad, but depends on other factors. Which *cough* is exactly what I said.
Here's another significant portion from that speech:
Quote:
Whether by intention or by happenstance, many, if not most, governments in recent decades have been relying more and more on the forces of the marketplace and reducing their intervention in market outcomes. We appear to be revisiting Adam Smith's notion that the more flexible an economy the greater its ability to self-correct after inevitable, often unanticipated disturbances. That greater tendency toward self-correction has made the cyclical stability of an economy less dependent on the actions of macroeconomic policy makers, whose responses often have come too late or have been misguided.
Being able to rely on markets to do the heavy lifting of adjustment is an exceptionally valuable policy asset. The impressive performance of the U.S. economy over the past couple of decades, despite shocks that in the past would have surely produced marked economic disruption, offers clear evidence of the benefits of increased market flexibility. In the United Kingdom, as well, a quarter-century of progress toward dismantling controls and increasing reliance on market forces evidently has resulted in a stronger and more flexible economy.
Yup. Free market=="good". Protected markets=="bad". He's basically arguing that protectionist tarrifs and opposition to free trade, and yes, even opposition to things like outsourcing could likely cause that trade deficit to be a problem, but allowing the natural market forces to self adjust will allow us to have our cake and eat it too (expanded businesses, higher GDP, and a trade deficit that'll swing back into order as the rest of the world catches up with what the US is doing today).
I was deliberately trying to avoid discussing the trade deficit because a) it's not really relevant to the discussion at hand and b) even the best experts in the world can't say whether what's going on right now is "good" or "bad" (it's always couched in terms like "if X then Y might be good, but if Z, then Y might be bad". You simply can't look at a trade imbalance and say *anything* concrete about what that means for the economy as a whole. Heck. Greenspan can't say what it means for the economy as a whole. So how can any of us make a claim that it's either good or bad?
Edited, Mon Dec 5 21:01:12 2005 by gbaji
