Saturday, November 29, 2008

The Second Great Depression

Now reread the last post but wherever you see the term 'gold supply' replace with 'full faith and credit of the United States.'

Hence my particular outrage at the recent introduction of synthetic Treasuries.

As stated in the introduction to this blog:

This much is clear: They will inflate until they can’t. Inflation rewards those that have their wealth first. All roads lead to deflation. The stock market will bottom when no one cares. Much like the aristocracy when the barbarians are at the gates… you save the silver (banks) first. They will destroy the village (dollar and markets) in order to save it. After the deflation is overwhelmed, the West will never be the same.

Like the authorities of the First Great Depression, the kitchen sink will be thrown until it is constrained by outside events.

As Citizen Jesse points out today in his commentary on a recent Krugman blog:

'And this is where we do part company with Mr. Friedman and Ms. Schwarz and join Lord Keynes in his observation that it requires fiscal and legislative actions to repair an economic shock such as the country was experiencing in the early 1930's....
Keynes would have likely observed that money supply was not enough, but was only a first step in stabilizing the system. The 'real cure' was to get people working again, to provide wages and gainful employment, to encourage consumption and economic activity.'

Am in complete agreement with Jesse and here are some concrete steps we can take to achieve that:

1) Accelerate construction of housing projects for
low-income urban residents.

(2) Accelerate infrastructure construction in rural

(3) Accelerate construction of railways, highways,
airports and other major infrastructure.

(4) Accelerate health, culture and education

(5) Enhance environment.

(6) Speed up innovation and structural adjustment.

(7) Speed up the reconstruction of the hurricane stricken

(8) Improve the income of urban and rural residents.

(9) Implement tax reform,encourage technological reform, and reduce the
burden on companies.

(10) Increase financial support for economic growth.

The blueprint is provided courtesy of The Peoples's Republic of China's '10 Measures for Increasing Domestic Demand and Increasing Economic Growth.' put out on Novemebver 5th, 2008.

History shows that the countries that spent more money on social development came out of the First Great Depression faster.

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