Isolationism isn't just military isolationism. It's protectionism, as well -- competitive devaluation, high tariffs, retaliatiory tariffs, all done in an attempt to protect your own economy and your own exchange rate at the expense of the other fellow, which doesn't work because the economy is global.
Globalization only works when there is international cooperation.
>>If the "beggar thy neighbor" theory were correct, the above time series would suggest that the US is now even more easily thrown into a great depression than it was in 1929.<<
I gather that you did not actually read the article by Keen that I linked to you. If you had, you would understand that it was about the destabilizing effects of simultaneous debt and deflation. A country with a huge economy like the US can handle high amounts of debt, and it can handle high rates of deflation, but it remains to be seen whether it can handle both at the same time. We've got high debt now but not deflation.
I've posted before that the gold/pound ratio was set too high when Great Britain went back on the gold standard in 1926, which inevitably led to pressure to either deflate or devalue. The major economies resisted devaluation for as long as they could, which caused massive deflation.
Finally, they engaged in competitive devaluation. In an attempt to stave off the inevitable, they enacted high tariffs.
>> In a later post, I'll give an explanation for the Great Depression that is compatible with the economic data from that time.<<
LOL! |
