Bruce Bartlett is one of the smartest economic oberservers out there. Considering you just got a schooling on the causes of inflation and deflation, you should be the last to cast stones.
For our part, let the Dollar fall to its fair market value (i.e. that point where imports equal exports).
There you go again. Read the article. Also read Greenspan's speech from Nov. 19th. The best way to handle the current account deficit is for the administration to balance the budget. Ideally through spending cuts, but that's not going to happen. Sadly that leaves tax increases. Greenspan and Bartlett are warning against a rapidly falling dollar. They are very smart people and there is historical precedent for what they are saying (see 1987 stock market crash) Listen to them and understand. Do some research rather than calling them stupid.
Trade deficits grow when the economy expands and shrink when it shrinks. Thus, we could tank the economy and have the strongest currency in the world. This is a reason the Euro is strong because the continent has unemployment rates about twice ours.
Collapsing the economy is not the way to go.
Agreed.
There are, however, significant differences between now and 1987. September/October 1987 was a classic bubble. Go back and read some of Martin Zweig's stuff on the euphoria that was in place at the time. We are currently in a range bound stock market. Also, interest rates peaked just before the crash. If I recall, 30 year treasuries hit 10% the Thursday before black monday. There is no such spike in interest rates at the moment.
“Bruce Bartlett is one of the smartest economic oberservers out there.”
The smartest economic observers would have to be John Maynard Keynes and Milton Friedman. Bruce Bartlett is a political hack.
Keynes argued that a slump was not a long-run phenomenon that we should all get depressed about and leave the markets to sort out. A slump was simply a short-run problem stemming from a lack of demand. If the private sector was not prepared to spend to boost demand, the government should instead. It could do this by running a budget deficit. When times were good again and the private sector was spending again, the government could trim its spending and pay off the debts they accumulated in the slump. The idea, according to Keynes, should be to balance your budget in the medium term, but not in the short run.
The US wants to see its currency weaken to ease its current account deficit which has been a factor behind the dollar's recent decline. Plus, it’s easier to fund the deficit if the dollar loses value.
Holtz
JeffersonRepublic.com