There are many ways to fight a war. You can have an old fashioned shooting war with a tremendous amount of destruction, or you can build deterrents and alliances through a more careful Cold War. When things get really bad, however, it’s far more traditional to have a Currency War. That’s what Brasil’s Finance Minister Guido Mantega called the world economy recently, putting a name and a bit of Brasilian bluntness to a situation that’s been brewing for a while.
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Economics and commerce, all built from scratch.
Growing Jobs
When the National Bureau of Economic Research proclaimed that the recession is over, not many people believed them. After all, unemployment still stands at levels we haven’t seen for many years – and very few businesses predict they will do much hiring in the near future. But looking only at GDP (the sum of all goods and services made in the economy) it appears that somewhere around June 2009 we started having positive economic growth.
That’s great, as far as it goes, but what does it take to create jobs? Running a little regression or two can give you a few potential answers – and none of them look all that good right now.
What Happened?
The US government and Federal Reserve has pumped about $4.7 trillion into the economy to get it moving again. That’s about one third of the total annual gross domestic product, or what the entire nation produces in a year. If you don’t think it seems to have done as much as it should have, you’re far from alone. Why this traditional stimulus has failed to kick-start the economy has been at the heart of many policy debates over this summer as we contemplate what comes next. The central problem, however, is that we have been treating the situation as just another recession and not something very different– despite obvious signs.
Next Generation’s Economy
There is little doubt that the economy needs some kind of breakthrough in order to get moving again. Official readings tell us that the recession is over, but with unemployment remaining high very few people believe it. There is one simple and very direct solution to kick-start job creation if the Federal government is willing to take drastic action – which I think is essential. That would involved making people close to retirement age eligible for Social Security and allow them to tap their retirement funds ahead of schedule, freeing up jobs in the private sector for a new generation of workers.
Economic Theory
While “Tea Party” activists have gotten most of the press this election cycle, they haven’t been the ones providing the heavy lifting for right-wing thought and plans. Every candidate needs more than “we’re angry!” if they expect to be elected. On the right that tends to take the form of what we might call Austrian School Economics, which includes the campaign of Tom Emmer for Governor of Minnesota.
I’ll spare you the details of this set of theories – you can follow the link yourself. The short version is that a high tax social safety net diverts wealth away from the vibrant part of the economy, individual choices, thus destroying wealth and ultimately working against its own aims by making everyone poorer. You don’t hear about this philosophy too directly because its adherents know it’s a real snooze and its detractors honestly don’t seem to understand where it’s coming from. I’d like to do my best to explain why this theory doesn’t work.
Barataria - The work of Erik Hare 