Looking forward to 2009

It will be a watershed year, ushering a new world economic order with the disorder most likely coming first. I just don't have the foggiest idea what this new order will look like.

It will be a time when we will all have to change our tune and have to think out of the box. I for one will worry more about growth in the advanced countries than in the developing world, will be warning against the dangers of protectionism, will be singing the praises of the IMF (if its recent actions and pronouncements are a guide), and will fret about too much state intervention. Changing times require changing lines. policy response be "bold" enough? Barack Obama has promised that it will be, echoing at least part of FDR's famous call for "bold, persistent experimentation" at the height of the Great Depression in 1932. In particular, he will need to go beyond Keynesian policies of fiscal stimulus to heal the deep wounds to economic confidence that lie at the root of the present crisis. So far, confidence building measures have been limited to financial markets, but the needs of Main Street are no less important. Workers who worry about being laid off are unlikely to go on a spending spree regardless of how much money fiscal stimulus puts in their pockets. Just as banks are hoarding cash, households will try to preserve wealth by increasing their saving. To counter this, incentives targeted directly at preserving employment will have to be part of the solution. Will Europe get its act together? This could have been Europe's moment. and left American policy focused on its domestic troubles, opening up room for global leadership by others. Instead, the crisis has demonstrated the deep divisions within Europe on everything from financial regulation to the requisite policy response. Germany has dragged its feet on fiscal stimulus, stymieing what should have been the second leg of a globally coordinated fiscal action plan. Alas, the best that can be hoped at this stage is that Europe will not undermine the global fiscal stimulus which even the International Monetary Fund the guardian of fiscal orthodoxy regards as absolutely essential. Experts on China differ in their estimate of the rate of economic growth the country needs to create employment for the millions that flock into its urban areas every year. But it is virtually certain that China will fall short of this threshold in 2009. The question is whether policy actions to date will do enough to stem a socially and politically dangerous slowdown in the economy. Whichever way the Chinese leadership responds, future generations may remember 2009 less for its global economic and financial crisis than for the momentous transformation it will have caused in China. Will there be enough global economic cooperation? When domestic needs become paramount, global economic cooperation suffers. But the costs of protectionism in trade and finance are especially large at moments like these. So far the International Monetary Fund has reacted with new found vigor, establishing a much needed short term lending facility and warning against too little fiscal stimulus. The World Trade Organization, meanwhile, has wasted valuable time on the irrelevant Doha round. It should have focused its efforts on monitoring and implementing the commitment made by the Group of 20 countries not to raise trade barriers. Did I say happy new year?

The IMF paper this week encouraged a coordinated global approach to fiscal stimulus exactly what Keynes would have wanted With that, and international commitment to policies of high employment, he would have wanted a free/open trading system what he lauded as "the wisdom of Adam Smith". (See Markwell, "Keynes and International Relations").

US leadership in international economic cooperation including an Obama Administration commitment against protectionism will be absolutely vital, for the US economy and for the world economy on which sustained US recovery depends.

This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the taxi 12s 2013 result of the existence of credit.

It shows that income / wealth disparity, cause and consequence of credit and of the level of long term interest rates, is the first order hidden variable, possibly the only one, of economic development.

It solves most of the puzzles of macro economy: among which Business Cycles, Stagflation, Greenspan Conundrum, Deflation and Keynes Liquidity Trap.

It shows that no fiscal or monetary policy, including the barbaric quantitative easing will get us out of depression.

It shows that Adam Smith, John Maynard Keynes, Karl Marx and Alan Greenspan don contradict each other but that they each bring a meaningful contribution to a same framework for understanding macro economy.

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In This Age of Turbulence People Want an Exit Strategy out of Credit, an Adventure in a New World Economic Order.

The same oligarchic dynasties, who worked feverishly to replace monarchies in earlier centuries, are being hoarded by a new wave of anarchists I don know what to call them, other than anarchists (for lack of a better term) who are hating, with an extreme passion, the social caste system in Europe.

This is not just new immigrants, but older and pervaseively lower class families, who have just not been benefitting the way they should in their country.

What happening in Greece should be a fore warning to countries like France, the UK, in particular, and, the rest of Europe.

Belgium, has mis read the growing under tide of the national political scene, which has been connected through communication and shared experiences, on what to expect from a country and leadership.

While Leterme was shaken, stirred and then defenestrated, due to his poor response to the growing economic crisis, one can only imagine what other political pressure he faced to do, or, not do things this was not the first time he decided to ask to be relieved of his duties.

The new Belgium PM, Rompuy, seems to be from the old European established guard.

I see major trouble ahead for Belgium which will be a contrasting event, compared to the tensions we see displayed in Greece, brought on by the catalyst of that fatal shooting.

Belgium will have a similar event, overplayed. And, then, analysts will be asking; "what in the world happened in Belgium!?!?!"

The world is changing and the old guard, is either pretending the change agents do not exist or are simply trying their hardest to remain relevant.

As for global business, 2009 will be a wasted year, unless, they can cut a Doha deal which, is, by all intents and purposes, a dead deal if we are seeing so much subsidies and protection, through the back door, by the way of economic stimulus packages!

A horrible feeling 2009, can be avoided, however. But, folks who have control now, have to let go and let God deal with it old Europe, Bushites, neo con progressive and the rest of the developing world; Just let go and let God deal with it!!

Really, there is nothing this old guard can do about it.

Work with everyone, or simply become irrelevant!

I not as worried about protectionism as Dani. I not fretting over protectionism against China. I would welcome it. And I not as worried as Dani about our politicians responding to voters taxi 12s complaints over leakage in our fiscal stimulus package. Our politicians have done a stellar job of doing nothing about trade deficits for a very long time. Why would they suddenly leap into action against fiscal leakage. They will do nothing and hope voters won catch on. You can be sure that 90% of the media will stay away from the problem 90% of the time. All here that think the Obama administration will give leakage priority raise your hands.

"It is pretty easy to increase the multiplier; just raise import tariffs by enough so that the marginal propensity to import out of income is reduced substantially (to zero if you want the multiplier to go all the way to 2.8). will have to confront this dilemma sooner or later. In an environment where the dollar has already appreciated against the Euro and even more significantly against emerging market currencies, fiscal stimulus here will produce an even larger current account deficit. If American consumers decide to spend 40 cents of a dollar of additional income on cheap imports from China and other foreign countries, the multiplier will be a mere 1.3. How long will it take before politicians of all stripes cry foul over the leakage through the trade account and the "gift to foreigners" that this represents? And they will have Keynesian logic on their side." Dani Rodrik

"future generations may remember 2009 less for its global economic and financial crisis than for the taxi 12s for sale momentous transformation it will have caused in China."