Irish Liberty Forum

When Textbook Macro Fails

with one comment

Writes Dani Rodrik:

The surpluses accumulated during the good years has given the Chilean government unusual latitude in responding to the crisis.  As a result, the economy is doing much better than its peers.  As Bloomberg reports, “the country’s economy is expected to grow 0.1 percent in 2009, as the region contracts 1.5 percent, according to the International Monetary Fund.”

And does good economics pay off politically?  Eventually, yes.  Five months after being burned in effigy, Velasco is currently President Bachelet’s most popular minister.

Perhaps “macroeconomics” only applies to South American countries. But elsewhere…

Saving for a rainy day...

Saving for a rainy day...



Spending like there's no tomorrow


…and I’m sure there are plenty of other examples.

Seriously, I’m getting tired of all this. If our biggest economic problem is governments not spending enough money, then I think we have it pretty good.

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Written by 20000miles

April 24, 2009 at 7:16 pm

Posted in economics

One Response

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  1. This is just Keynesianism. Applied more intelligently than most. Instead of waiting for deficits to be needed, this man displayed great courage and took away his people’s money, rather than raise interest rates. This also had the effect of keeping the bubble smaller and building up savings, albeit in the wrong hands.
    Come to think of it, why have a central bank at all? If he were to become more widely known, giving the Keynesian economists a problem, there might be seen to be less need for the central bank which is justified as a regulator but has always made things worse when it mattered. Who cares if one bank goes? They should all be full partnerships, except for credit unions. This solves the OPM problem. Let us just roll back the years a bit more? All banks which over lend can then be punished by a default. Let us act by the market! There’s a novel thought.

    Pat Donnelly

    April 29, 2009 at 5:11 am

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