Re: Commentary: Is it 1929 all over again?

On Wed, 22 Oct 2008 07:21:14 -0500, Matthew Scott
<scottm@xxxxxxxxxxxxxxxxxxxxx> wrote:

El Castor wrote:
On Tue, 21 Oct 2008 18:15:13 -0400, Jim Higgins wrote:
Commentary: Is it 1929 all over again?

http://www.cnn.com/2008/US/10/21/klein.depression/index.html

Of course not. We learned our lesson. We wouldn't be stupid enough to
raise taxes and tariffs heading into an economic downturn.
.... or would we?
If your name is Barack Hussein Obama, apparently you would.

A cautionary tale, By George Friedman and Peter Zeihan: The Depression.

As economic output dropped in the 1930s, governments worldwide adopted a
swathe of protectionist, populist policies ? import tariffs were
particularly in vogue ? that enervated international trade. In order to
maintain employment, governments and firms alike encouraged ongoing
production of goods even though mutual tariff walls prevented the sale
of those goods abroad. As a result, prices for these goods dropped and
deflation set in. Soon firms found that the prices they could reasonably
charge for their goods had dropped below the costs of producing them.

The reduction in profitability led to layoffs, which reduced demand for
products in general, further reducing prices. Firms went out of business
en masse, workers in the millions lost their jobs, demand withered, and
prices followed suit. An effort designed originally to protect jobs (the
tariffs) resulted in a deep, self-reinforcing deflationary spiral, and
the variety of measures adopted to combat it ? the New Deal included ?
could not seem to right the system.

Economically, World War II was a godsend. The military effort generated
demand for goods and labor. The goods part is pretty straightforward,
but the labor issue is what really allowed the global economy to turn
the corner. Obviously, the war effort required more workers to craft
goods, whether bars of soap or aircraft carriers, but ?workers? were
also called upon to serve as soldiers. The war removed tens of millions
of men from the labor force, shipping them off to ? economically
speaking ? nonproductive endeavors. Sustained demand for goods combined
with labor shortages raised prices, and as expectations for inflation
rather than deflation set in, consumers became more willing to spend
their money for fear it would be worth less in the future. The
deflationary spiral was broken; supply and demand came back into balance.

http://www.stratfor.com/

Very worrisome. That is exactly the kind of primitive union dominated
thinking that we might expect from an Obama administration.
.

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