Sure but there's still the question of degree. The Swedish example doesn't prove "deregulation good, regulation bad". A lot of their deregulation already exists here in the states. Deregulation of telecomm? check the US did it in the 80's. Allow for private competition with their state run healthcare system? We don't offer state run healthcare except to seniors and the poor and for the most part there is private competition. Aviation deregulation? Check. The US did it in 78. Deregulation of the Railway system? Check US did it in 1980. Deregulation of energy? Remember Enron...check. One thing they have the US beat in is they've eliminated all farm subsidies.
They've also made regulation changes to the Labor markets but they are now more inline with US labor policies. If you're making a case that we need to emulate Sweden...well the reality is that in most senses they've dregulated markets that the US has dregulated for 3 decades or more.
I never claimed that Sweden was any kind of "Free Market" paradise. I simply pointed out that it was a good example of (comparative) austerity and domestic spending reform leading a nation out of a sustained fiscal crisis. A fiscal crisis, I might add, which was very similar to our own.
In any case, it is certainly a blow to the common viewpoint among the American Left that
any kind of domestic spending reform or deregulation will inevitably result in the sky falling in on the entire US economy.
I don't agree with the first part. A banking run/collapse has a tendency to spread as one stable banks/investment banks find their capital vanishing as the other banks/investment banks start declaring bankrupcty. There is a domino effect and it has impact well beyond the banks. There's a reason the government had to step in and start guaranteeing short term credit (as Sweden did in the 90's). I definately agree with your second part though.
Even if there is a domino effect, the market will eventually rebuild and recover. In situations where the entire system has become so rotten as to be rendered unsalvageable, there might very well be no other choice.
At a certain point, you simply have to pull the plug.
At a certain point, nature pulls the plug for you regardless of what you do to try and stop it.
Once again there are major difference. Sweden was facing inflationary pressures and a devaluation of their currency. Japan was experiencing deflation. Sweden had a growth in exports due to their devaluation of currency compared to the adopted Euro , Japan was seeing more competition from other South East Asian countries coupled with a rise in the value of the Yen further eroding their competitiveness. Not all recessions are the same and call for the same remedy. It's not always "austerity and deregulation and call me in the morning". The remedy should try and treat the problem. . High inflation...like in the 80's under Volcker or in Sweden higher interest rates may be the remedy. Deflation? Lower interest rates. Deflationary pressure even after low interest rates? Stimulus or you're heading into a deflationary spiral. In both cases doing the opposite remedy compounds the problems.
Which again begs the question of how exactly Bernake or the Japanese thought that the combination of low interest rates and inflation (which drive up the costs of living and basic goods and services) were good ideas when facing jobless recoveries which affect personal incomes and consumer spending more than anything else.
I would like to make the obvious point. The changes in money supply is monetarism and Bernanke's response of increasing the money supply when faced with deflationary pressures is exactly what Milton Friedman suggested. In fact Paul Krugaman warned against Bernanke's "fiscal stimulus". I'm not sure if Milton Friedman is now a hardcore leftist or not to the right but at least be accurate on your school of thought. Keynes actually said the money supply doesn't matter. Milton Friedman stated it did matter and in fact could be used to influence demand and that inflation/deflation were a result of expansionary or contractionary monetary policy.
Puh-leez!
Krugman's only major complaint with Bernake's version of economic stimulus since day one has been that it "isn't big enough" to suit his absurd Keynesian delusions.
Where Bernake wants to use gasoline, Krugman wants to go with an A-bomb instead. I would hardly consider that to be an improvement.
Ummm...you're conflating a lot of different thing. Keynesian economics is an attempt to increase aggreagate demand and a remedy for an economic problem. Socialism is an economic system.
Democratic Socialists are huge supporters of Keynesian economic theory and always have been.
Sweden was able to decrease government spending due to a growth in exports and not experience a decrease in aggregate demand. Aggregate demand is aggregate demand. It doens't matter if the government buys the goods, Swedish citizens, or Estonian citizens. In 1993 due to a devaluation in their currency (as earlier mentioned) Swedish trade balance went from -2% of GDP to as high as 4% of GDP in 97.
That's essentially a large boost in aggregate demand which is exactly what stimulus measures are for. 1994 is the first year of positive growth for Sweden after their recession and low and behold...it was the year they went from next importers to next exporters.
The Swedes did not use Keynesian policies to achieve this result, so attempting to chalk it up as a victory for Keynesian economic theory is massively dishonest to say the least.
According to most Keynesians, higher interest rates and reduced government spending are exactly the opposite of "stimulus."
It's not a renaissance. Sweden comparable to other countries was richer in the 70's. Sweden was not some backwoods economy that exploded on the scene. Sweden benefited by keeping their currency instead of switching to the Euro. They were able to go from net importers to net exporters virtually overnight due to the adoption of the Euro by their competitors and neighboring markets. They are still a massive welfare state. Government spending still makes up a large % of their GDP. They are still more socialist in any measure than the US.
All true,
but... None of that changes the fact that the Swedish Economy has become infinitely more productive and stable since cutting back on government expeditures and welfare costs.
By moving to be more in line with "Free Market" ideals, the Swedes have prospered.
Bernanke is in charge of monetary policy. His monetary policy is pretty much by the book on what a Fed chairman should do when faced with the situation he's in.
I'm sorry, but the "book" is wrong.
Bernake's ineffectual floundering has more than proven that. All he is doing now is reaffirming
Rita Mae Brown's definition of insanity.
Our system has very nearly been broken beyond what stimulus can repair. If we want to avoid the same fate as Japan, it is time to seriously consider making fundamental changes to how our nation in run.
Thank God some ****ing idiot like Rick Perry isn't President and put in charge some numbnut that would push constractionary fiscal policy right now. It's not the fact that increasing interest rates is some possible remedy it's like ****ing chopping off someone arm when they have a splinter in their hand and not treating it and allowing gangrene to set in...well you get the picture.
Gangrene is already setting in. It is simply the case that no one has to intestinal fortitude to call a spade a spade yet.
Japan has been rotten from the inside out for more than a decade now, and we'll soon be joining them.
I'm curious...what do you think would happen if Bernanke did nothing and increased interest rates? I guess I'm completely shocked/confused/amazed that anybody thinks that in our situation decreasing the money supply is the answer.
I think the economy would crash, restructure, and eventually rebound. It is not a "pretty" opinion, but it might very well be the only option available to us before too long.
Hell! If Bernake's latest bit of fiscal idiocy fails (and it almost certainly will) the market will probably crash regardless of interest rates. You can only push the limit so far.