The Past: Abandoned principles and misguided policies

Posted November 25, 2010

Policy Mistakes

• Unbalanced Budgets
• The End of Sound Money
• Promoting Trade with no concern for the balance of trade
• Financial Sector Deregulation
• Economic Management through bubble creation.

Trade

• The collapse of Bretton Woods
• Trade Imbalances
• Flaws in The Dollar Standard: no automatic adjustment mechanism.
• Globalization: trade imbalances, disinflation, interest rates
• Financing the trade imbalances with paper money creation
• Free Trade was good; Debt Financed Trade is bad

Credit

• Capital Inflows caused economic bubbles in the surplus countries
• Capital inflows caused the economic bubble in the US
• Credit growth drove economic growth in the US
• How credit creates the bubble: the mechanics of a credit bubble.
• Why bubbles pop.
• Capital flows and banking crises.
• Economic management through bubble creation in the US
• Bernankism
• Why are interest rates 0%?
• Quantitative Easing

The Consequences

• Capitalism becomes Debtism
• Debtism collapses; Statism fills the gap.
• Saving the Financial Sector
• Supporting Aggregate Demand
• The Corruption of Capitalism
• The Great Depression and The New Depression
• The conventional view of the causes of the Great Depression is wrong.