Sunday, October 5, 2008

Reaganomics is responsible for this mess

Don't believe me? Why should you? I'm a scary evil liberal.

But you should believe Francis Fukuyama, a founding neocon who pushed Reagan-era policies until... well, until he wrote this article.

He says:
"Financial institutions are based on trust, which can only flourish if
governments ensure they are transparent and constrained in the risks they can
take with other people's money."

He also says:
"Signs that the Reagan revolution had drifted dangerously have been clear over
the past decade. An early warning was the Asian financial crisis of 1997-98.
Countries like Thailand and South Korea, following American advice and pressure,
liberalized their capital markets in the early 1990s. A lot of hot money started
flowing into their economies, creating a speculative bubble, and then rushed out
again at the first sign of trouble. Sound familiar? Meanwhile, countries like
China and Malaysia that didn't follow American advice and kept their financial
markets closed or strictly regulated found themselves much less vulnerable.
A
second warning sign lay in America's accumulating structural deficits. China and
a number of other countries began buying U.S. dollars after 1997 as part of a
deliberate strategy to undervalue their currencies, keep their factories humming
and protect themselves from financial shocks. This suited a post-9/11 America
just fine; it meant that we could cut taxes, finance a consumption binge, pay
for two expensive wars and run a fiscal deficit at the same time. The staggering
and mounting trade deficits this produced—$700 billion a year by 2007—were
clearly unsustainable; sooner or later the foreigners would decide that America
wasn't such a great place to bank their money. The falling U.S. dollar indicates
that we have arrived at that point. Clearly, and contrary to Cheney, deficits do
matter."


Look, I don't like Fukuyama's ideas. I disagree with him about 99% of the time because he often pushes classic conservative and neo-conservative ideas that I simply disagree with because, as you know, I'm an evil liberal. However, I tend to read things that he writes because he's really smart and knows what's going on. I suggest you read his article too, whether you agree with him or not.

2 comments:

THE EVIL SLUT CLIQUE said...

As fellow evil liberal women we want to make sure you're aware that Sarah Palin has invited us all to go to hell. We want to make sure we pass the word along to all of our friends so that we can have a good time once we get there.

Tim Marshall said...

Hi....methinks you're onto something. I've just blogged on a similar theme. And I claim copyrite on a new economic theory 'Flood Up Economics'
www.skynews.com/foreignmatters