Saturday, January 19, 2008

Johan Schück Makes The Same Observations As Me-Only Later

Johan Schück, the economics columnist at Dagens Nyheter has lately started to notice things which I noticed a long time before him-and almost all other economic commentators.

First, last week he noticed that the U.S. economy may already be in a recession, an observation I made in early December.

Now, he notices that with regards to monetary policy America is more interventionist than Europe, an observation similar to the one I made two year ago how while the micro economic policies of America is better (less interventionist) than Europe's, its monetary policy have been worse (more interventionist/inflationist) than Europe's. Although, they don't practice this consistently, in theory European central banks don't even see it as their job to stabilize the business cycle. Although they again in practice often in fact do try to intervene to prop up the economy they don't do it as much as the Fed do. As Schück puts it:

"In the United States, there is a belief in the possibility of controlling the business cycle, while the experience from Europe is that activism of that kind rarely pays off. That is not consistent with the general belief that Americans want to limit the role of government and the attitude is the opposite among Europeans"(Translated from Swedish by me)


Blogger pdcreative said...

Amen! I've been arguing this for quite a while. The Fed absolutely incenses me. To think that they can endlessly circumvent the natural business cycle is simply fool's gold. By pursuing a monetary policy which attempts to avoid recessions at all costs they are only creating greater and greater imbalances which will eventually be cleaned out by market forces.

The longer we delay, the worse it will be.

6:04 PM  
Blogger Jeff said...

From a post you referenced:

"That is because they either tend to focus exclusively on the microeconomic conditions in America or because they are guided by non-misesian monetary theories like supply-side economics or Friedmanite theories."

I'm curious about what Friedanite theories do you disagree with?

Money is nothing more than a lubricant for allowing the processing of economic transactions isn't it?

7:31 PM  
Blogger Jeff said...

pdcreative, talks about imbalances. Have these imbalances not been a part of the US economic history even when on a gold standard?

Imbalances work themselves out; the key is to not let things degrade to the extent that people lose confidence in the system.

7:34 PM  
Blogger stefankarlsson said...

Jeff, with regard to Friedmanite theories, I refer mainly to his view that money supply increases only affect the general price level, while not affecting relative prices. This would imply that monetary policies is not responsible for asset price bubbles.

And as for the issue of imbalances, at no time during the classical gold standard were imbalances anywhere near current levels. Savings is at an all time low, while debt levels are at all time highs.

11:49 PM  

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