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The Future: What Must Be Done

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Understanding our starting point: the brink of disaster. The life raft analogy.

  • What caused the Great Depression?

Policy Options

  • Cut government spending now
  • Maintain current levels of government spending
  • Increase government spending to restructure the economy
  • Quantitative Easing: Economic management through money creation

The Bad Future: large budget deficits and eventual large scale monetization of the debt.

  • Protectionism
  • Hyperinflation
  • Food riots
  • Deflation
  • Depression
  • War
  • The Fall of Rome

The Good Future: Restructuring America, Rebalancing the global economy

  • Learning from Japan’s mistakes
    • Large deficit spending is unavoidable when a great bubble pops.
    • The deficit will be much easier to finance than expected.
    • Don’t waste the money building bridges to nowhere.
  • $3 trillion would resolve the crisis and lock in a new American Century
  • How it could be financed:
    • With the pool of bubble money plus cash flow (flow of funds); spare financial capacity.
    • Making to most of the opportunities The Dollar Standard affords the US.
    • Printing money as a last resort. Given globalization’s impact on wages and inflation it is possible.
  • Creating miracles
  • What’s good for America is good for the world.

A five to ten year window of opportunity exists to resolve this crisis

  • The deficits can’t be financed forever. Budget outlook.
  • Impediments to action
    • Incorrect conventional “wisdom”
    • Vested interests
    • Muddled economic theory
    • The loss of nerve
  • Why we can’t go back the way we came. We are not starting from a laissez-faire Garden of Eden.

A call for reform

  • What is the philosophy guiding US economic and political economy?
    1. Who benefits?
    2. Who loses?
  • Budgetary reform
  • Monetary reform
  • Trade reform
  • Financial sector reform: credit is dangerous
  • Political reform
  • Avoiding A Third World America

Policy tools for a new century

  • A global minimum wage
  • SDRs
  • Government investment

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