Michael wrote:
Wouldn't it be fair to say that the United States is on relatively thin
ice with respect to maintaining both financial stability and aggregate
demand.
Alex comment:
Another way of looking at it is to think that financial systems are
inherently unstable (Minsky). And that (perhaps) a way to attenuate cyclical
crushes of the size and periodicity we are witnessing at present times would
be to allow for a (relative) degree of financial repression (or at least
international co-ordination) and regulation. (Aggregate demand is necessary
anyway, all the time, for an economy, global or local, to grow).
Now, one could think that there might be a contradiction in the mainstream
view, since we often hear, in these times, about the need of better
regulatory frameworks (e.g. even from Bretton Woods institutions). And, at
the same time, there is an increasing pressure towards financial
liberalization. What Bretton Woods institutions and the like aim at is
'correcting' mismanagement, corruption, etc.; not necessarily 'keeping a
tight rein' on (the possibilities for accumulation of) the financial system
(nowadays called 'global financial architecture). As a result of these
tendencies, governments are left with less instruments to manage, control,
monitor, whatever, policies. And consequently, the "closure" of the model
seems to be 'to smash labor' (as Michael put it). Both in times of
'prosperity', in order to prevent a crisis, and in times of 'instability',
in order to come out of a crisis.
