Jump to content
House Price Crash Forum
Sign in to follow this  
AvidFan

Nobel Economist Sees Roaring Recovery

Recommended Posts

http://www.telegraph.co.uk/finance/finance...g-recovery.html

Nobel economist sees a roaring recovery

At the ripe age of 78, Nobel economist Gary Becker finds himself the pin-up hero for libertarians around the world convinced that massive government response to the Great Contraction of 2008-2009 is not only unnecessary but almost certainly a threat to economic freedom as well.

By Ambrose Evans-Pritchard in Cernobbio

Published: 8:51PM BST 05 Sep 2009

While the banking crash no doubt had its frightening moments, the crisis has in his view been overstated to advance a sweeping collectivist agenda. Stripped of drama, the US recession is following the pattern of typical downturns. It is no worse than 1973-1974, he says.

Unemployment, now 9.7pc, will peak at levels far below the post-War high of 10.8pc in the early 1980s.

"It's over. Forecasts of a Great Depression turned out to be wrong," he said.

As keeper of the free-market flame at the University of Chicago, Dr Becker has been watching Washington long enough to know that once Big Government intrudes deeply into wide areas of the economy it becomes nigh impossible to dislodge.

Nor can the US Federal Reserve be trusted to act with fortitude when the time comes to drain its massive monetary stimulus – and that time may soon be upon us, he says, if it isn't already. What worries him is some $800bn (£489bn) excess reserves sitting waiting to combust.

"There is potential for very serious inflation if the Fed gives in as usual to political pressures. I'm not convinced this recovery is going to be slow. We're close to working off the housing excess.

"Loans are picking up and productivity is doing very well, which means companies are going to start hiring more rapidly," he said at the Ambrosetti Workshop on Lake Como, where policy elites and prime ministers gather each year to chew over global affairs.

Dr Becker is known to many as the Godfather of "Freakonomics", a foray into the markets for crack cocaine and cheating among Sumo wrestlers. In a nutshell, it posits that incentives guide much of economic life. Crime often pays.

His own epiphany came when he chose to break the law one day by parking in a banned spot that saved time and stress. Given the risk, his action was entirely rational.

He won the Nobel Prize in 1992 for work on human capital and the workings of the family, meshing sociology with economic theory.

Pale, frail, but still combative, he agreed to chat with The Sunday Telegraph at Como's Villa D'Este. "I like a free-market paper," he said.

His jibe that depression-mongers have been silenced is sure to nettle those such as Dominique Strauss-Kahn at the International Monetary Fund, who reminded critics this week that if recovery is at last under way that is only because governments hit the nuclear button to avoid a repeat of the 1930s. The IMF says $9 trillion has been committed worldwide in rescues.

Pressed on this point, Dr Becker accepts that there might have been a depression – though with a small d, at worst. He belongs broadly to the camp that traces this crisis to misguided efforts to interfere with the purging effect of recession of the dotcom bust, and before. As any forester knows, if you prevent brushfires running their natural course, the build-up of dry timber makes a full-fledged forest fire more likely.

But his views are subtle: he does not fault the Fed for slashing rates to zero or letting rip on bond purchases. The policy validates the life-work of his mentor, the late Milton Friedman, who argued the Great Depression could have been prevented by such methods. "Quantitative Easing has been the successful part of this. I give the Fed good marks," he said.

What disturbs him is the $800bn blast of spending that distorts the economy and will not gain traction until recovery is already well advanced. "You don't rely on fiscal policy to get you out of recessions. It takes too long for Congress to agree on anything," he said.

Just $100bn has been spent so far (a low estimate) and much of the rest will go into health care, green technology, and other sectors that do not need it. "To call it fiscal stimulus is false advertising. This is re-engineering our economy."

The economy will rebound as surely as night follows day, but not because of government action. A "third technological revolution" is leading to an explosion of inventions that trumps state policy. All that Washington will achieve is to gum up the works.

Will Europe will share fully in the hi-tech wave? Dr Becker's work on family structures has led him to hone in on demographic forces as the arbiters of economic destiny. Once a country's fertility falls below the "replacement" rate, it is almost impossible to reverse. Over time this really does lead to a slow slide into perma-slump.

"Every country in Europe is below replacement. It is really serious in Germany, Italy, Belgium, Spain, and Eastern Europe."

Almost alone in the rich world, America's fertility has held steady. It is fair to say that the demise of the USA – like the death of Mark Twain – has been greatly exaggerated.

Fits with what people on here have said - the Japanese economy, a laboratory for how countries with ageing populations perform, is where we're headed. And it depends on your viewpoint, but compared with most of Europe we'll probably do slightly better. Compared to the US, maybe not.

Some people say the UK demographic is better than that of the US but I can't see it somehow. However, the US has potentially made much bigger promisses to its population than the UK has, and hey - they're getting angry and they've got guns.

Share this post


Link to post
Share on other sites
Fits with what people on here have said - the Japanese economy, a laboratory for how countries with ageing populations perform, is where we're headed. And it depends on your viewpoint, but compared with most of Europe we'll probably do slightly better. Compared to the US, maybe not.

we have a large baby boom on RIGHT NOW and a positive attitude to immigration, so I think we are MUCH better than many parts of Europs. USA demographics do indeed look fantastic,

Share this post


Link to post
Share on other sites
This man is clearly completely loopy.

Just another fool, I'm afraid.

completely. Mainly because his fears about inflation are loopy rather than noberl laureate. Same applies to his cheerleading of monetary policy [specifically QE] as the catalyst for recovery. Bonkers. We all know govt. intervention to rescue the financial sector and aggressive fiscal stimulus is wot won it. If indeed it has been won.

It's ironic the neoliberal monetarist loons try and lay claim to the victory of free markets and monetary policy during this crisis, when govt. sector interventon has been so unprecedented. :lol: And without the levels of intevention we've seen there would be no talk of recovereh :lol:

Also, goes to show how much the monetarists misunderstand the modern monetary system. And the role of govt. in it.

Share this post


Link to post
Share on other sites
http://www.telegraph.co.uk/finance/finance...g-recovery.html

Nobel economist sees a roaring recovery

At the ripe age of 78, Nobel economist Gary Becker finds himself the pin-up hero for libertarians around the world convinced that massive government response to the Great Contraction of 2008-2009 is not only unnecessary but almost certainly a threat to economic freedom as well.

By Ambrose Evans-Pritchard in Cernobbio

Published: 8:51PM BST 05 Sep 2009

Fits with what people on here have said - the Japanese economy, a laboratory for how countries with ageing populations perform, is where we're headed. And it depends on your viewpoint, but compared with most of Europe we'll probably do slightly better. Compared to the US, maybe not.

Some people say the UK demographic is better than that of the US but I can't see it somehow. However, the US has potentially made much bigger promisses to its population than the UK has, and hey - they're getting angry and they've got guns.

So his ideal is an unlimited population? :blink:

Share this post


Link to post
Share on other sites
Having a larger population only works if peak oil is untrue.

Rubbish. Just because they're mostly foreigners doesn't mean they're inedible.

Share this post


Link to post
Share on other sites
Fits with what people on here have said - the Japanese economy, a laboratory for how countries with ageing populations perform, is where we're headed. And it depends on your viewpoint, but compared with most of Europe we'll probably do slightly better. Compared to the US, maybe not.

Some people say the UK demographic is better than that of the US but I can't see it somehow. However, the US has potentially made much bigger promisses to its population than the UK has, and hey - they're getting angry and they've got guns.

These things are relative. The German demographic situation is ridiculous.

They'll be down to 30 million before the end of this century. Furthermore, immigration doesn't work for them, nobody is entirely sure why. You can move in an immigrant family from a culture of large families and in a generation they go from 5 or 6 kids to 2, 1 or none.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   295 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.