At 02:15 AM 10/4/01 +0000, you wrote: > > Rarely do so many dramatic forces bunch together like this. Do any of > > you have any thoughts about what to expect in the economy? > >Well, we can't discount the possibility of a big Keynesian splurge under the >cover of war and rumours of war, but it does all depend on stuff like how long >it is before Washington acts, and how firm the Capitol bipartisanship is at >the time (and if the odd thermonuclear plant doesn't go up, and if a few >trillion Yen aren't recalled from Wall St, and if ...). Didn't ol' Storm >Thurmond (you know who I mean, anyway) take a nasty turn in the House >yesterday? Is he okay, or is the House differently balanced today - more or >less likely to man the pump?
Thurmond's in the Senate, but I know what you mean. I don't think the balance has changed a lot. >I certainly think rate cuts ain't up to much. Capital just ain't seeing >investment opportunities right now, and it doesn't matter how cheap money is >while that persists. Failing a return of consumer confidence, a lower buck >seems the main hope for US producers and investors. Am I being too simplistic >in thinking that printing a few hundred billion of those right now would not >only prime some pumps, but also make production in the US profitable again? Krugman's article in Sunday's NEW YORK TIMES magazine fits with what a lot of the economists interviewed on US NPR yesterday: the WTC bombing mostly hurts demand, as you say. BTW, PK's article is amazing in that he didn't say much that was new. He'd clearly written the article already and then added a few pages to bring in the 911 effects. It's all about how the nominal interest rate can't go below (close to) zero, so the US may end up in a situation like Japan (the "horizontal LM curve" situation). He still doesn't bring in stuff like the fact that people may not want to borrow (because of unused capacity & excessive debt), even with negative real interest rates, so that spending won't respond (the "vertical IS curve" situation). Nor does he bring in the possible problem of credit rationing, in which banks refuse to lend, no matter what the interest rate. Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
