A great entry by Greg Costikyan, a game designer whose blog I read and occasionally link to, on a new blog called Democratic Freedom. The blog’s intent is to support libertarian and freedom-centered efforts within the Democratic Party.
Now Is the Time For All Good Men to Come To the Aid of Their Country
This was something that struck my eye. Greg and I both blogged this might happen after the election and I thought we were just overreacting. Being in the company of a former Fed chairman I feel more justified:
We are running fiscal and current account deficits so large that Paul Volcker, former chairman of the Fed, says we have a 75% chance of an Argentina-style currency crisis within the next five years.
That should be a very scary, sobering thought. Argentina was, and last I checked still is, on the verge of complete out and out bankruptcy. The economics of it may seem weird (I admit I can’t understand them) when the banks in a country may have billions and billions of dollars, but it is the nation’s reserves that back those banks up. Our nation’s reserve is completely tapped out and is heavily on loan to its citizens as well as foreign nations and corporations. At some point those debtors, like any smart debtors, realize their loans are not going to be paid back in full plus interest in any reasonable period of time, and the loans dry up. When that happens, the nation’s reserve falls. Then banks fall. Then banks call in their loans (remember, the bank owns your car and house, not you), and you’re left sitting on the street with a pile of clothes, and when an economy does that, more than likely unemployed.
I don’t think this will happen though, or maybe it’s just I don’t want it to. America’s economy is big. Really big. Like a huge steam engine it can really pick up speed, but once it gets going in a direction, it REALLY gets going. You know the old saying, the bigger they are the harder they fall.
Write your elected representatives and ask them to send the U.S. back to fiscal responsibility ASAP before we wreck our economy.
One important point in all this is that Argentina’s crisis occured because they went off the gold standard and based their value directly on the value of the American dollar. This was supposed to “save” their economy and just made bad things worse because they couldn’t make corrections to their monetary policy to counteract America’s monetary maneuvering. There’s actually a really good description of it in “Naked Economics: Undressing the Dismal Science” (I heard about it on NPR! As they say)
November 17, 2004 @ 11:30 amI vaguely recall that now. That is a good point. From what little economics I know, kind of a crazy maneuver if you ask me (to not base your currency on something concrete).
I love NPR
Ian’s finally rubbed off on me enough that I catch myself listening on my way home (especially with all the crud on the radio these days). I’ll have to look for that book/article.
The new blog (Democratic Freedom) seems interesting. I try to broaden my horizons occasionally and not just read pure Democrat, liberal news (Daily Kos, Salon). This one will prevent libertarian points of view, which I don’t always agree with, but I’m curious on their approach to the issues. I also read Reason occasionally (www.reason.com), which is a free-trade news site (free minds and free markets is their slogan). Some of their stuff is really out there, but again I’m curious about their approach to the issues.
Oops..this comment is turning into a blog entry in itself..stopping now.
November 17, 2004 @ 11:38 amI’ve added Naked Economics: Undressing the Dismal Science to my Amazon.com wishlist. Sounds like a way to actually learn economics without falling asleep!
November 17, 2004 @ 12:26 pmYeah, I love listening to NPR on my drive home from work–my 1.5 hour drive seems less of a waste if I actually learn something about a foreign country or an artist or something. I’ll try those sites–I like to get information from a broad range of sources. People are less likely to say you’re slanted if you get your news from a lot of different places! Anyway, the author of Naked Economics was interviewed on NPR and he had some really interesting things to say about how we compare apples and oranges economically (saying gas is the highest price it’s ever been is technically true, but if you adjust for inflation, it was really “higher” in 1981). It’s a good read–dare I say, a page-turner??
He takes an academic view of the world, and instead of basing decisions on his (hinted-at) liberal social values, he looks at all sides with pragmatic objectivity. He is such a voice of reason–I’m practically his disciple!
November 17, 2004 @ 12:49 pm