Dr.Who
Well-Known Member
in 1998 Milton Friedman said that we should let weak banks go under and let the strong ones remain. That we should abolish the IMF because it encourages people make risky business decisions that can cause recessions.
Here is the article:
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Both resident scholars at the Hoover Institution in Stanford, Calif., they say: To fend off an impending recession and to help the world economy, Congress should: one, cut income taxes; and two, help kill the International Monetary Fund and stop its meddling in currencies.
Both men worry about what will happen if the U.S. economy slows down -- the U.S. has been the locomotive pulling the world economy the past several years.
Instead of pumping money into the IMF, says Shultz, Congress should strengthen the U.S. economy. How? By cutting taxes. Shultz recommends a 10% across-the-board cut in income taxes, thus strengthening purchasing power, increasing corporate profitability and encouraging investment.
"Outside of the World War II period, federal, state and local taxes are at an alltime high as a percentage of national income."
Friedman: "If we don't cut taxes Congress will opt to spend the money anyway."
On the IMF, too, they agree: "Let the IMFbe abolished," says Friedman. "Distribute the assets to each country and let the markets take care of the fallout."
Friedman and Shultz agree that the 1995 IMF bailout of Mexico set the stage for the present East Asian crisis. "Because of Mexico everyone thought they would be bailed out of Russia, too," says Shultz.
Friedman: "Businessmen should not have a free insurance policy every time they take a risk in global markets. The Mexican bailout helped fuel the East Asian crisis that erupted two years later. It encouraged individuals and financial institutions to invest in the East Asian countries, and reassured them about currency risk by the belief that the IMF would bail them out if the unexpected happened and the exchange pegs broke.
"By encouraging people to speculate with other people's money, the IMF has been a destabilizing factor in East Asia. Not so much because of the conditions it has imposed on its clients, whether good or bad, as by sheltering private financial institutions from the consequences of unwise investments."
Indonesia's solution isn't IMF money, Shultz says. "The solution is to restore the confidence of the ethnic Chinese so they bring back the $80 billion they pulled out."
Japan is at the center of most of the Asian problem, Friedman says, and Japan doesn't need the IMF either: "Japan's been following a deflationary policy. It turned illiquid banks into insolvent banks just as the Fed did in the U.S. in the early 1930s. Our depression was caused by allowing the money stock to be reduced by a third.
"The Bank of Japan should print more money, raising monetary growth to 6%. Then let the weak banks go under and allow others to acquire the good assets. Just as the U.S. did during the savings and loan debacle."
The bad news: Even as Shultz and Friedman spoke, both parties in Congress were getting ready to agree on new spending programs, the Republicans having cravenly abandoned their efforts to reduce taxes. And both parties seemed close to agreeing to refund the IMF.
http://www.forbes.com/forbes/1998/1102/6210052a.html
Here is the article:
[]
Both resident scholars at the Hoover Institution in Stanford, Calif., they say: To fend off an impending recession and to help the world economy, Congress should: one, cut income taxes; and two, help kill the International Monetary Fund and stop its meddling in currencies.
Both men worry about what will happen if the U.S. economy slows down -- the U.S. has been the locomotive pulling the world economy the past several years.
Instead of pumping money into the IMF, says Shultz, Congress should strengthen the U.S. economy. How? By cutting taxes. Shultz recommends a 10% across-the-board cut in income taxes, thus strengthening purchasing power, increasing corporate profitability and encouraging investment.
"Outside of the World War II period, federal, state and local taxes are at an alltime high as a percentage of national income."
Friedman: "If we don't cut taxes Congress will opt to spend the money anyway."
On the IMF, too, they agree: "Let the IMFbe abolished," says Friedman. "Distribute the assets to each country and let the markets take care of the fallout."
Friedman and Shultz agree that the 1995 IMF bailout of Mexico set the stage for the present East Asian crisis. "Because of Mexico everyone thought they would be bailed out of Russia, too," says Shultz.
Friedman: "Businessmen should not have a free insurance policy every time they take a risk in global markets. The Mexican bailout helped fuel the East Asian crisis that erupted two years later. It encouraged individuals and financial institutions to invest in the East Asian countries, and reassured them about currency risk by the belief that the IMF would bail them out if the unexpected happened and the exchange pegs broke.
"By encouraging people to speculate with other people's money, the IMF has been a destabilizing factor in East Asia. Not so much because of the conditions it has imposed on its clients, whether good or bad, as by sheltering private financial institutions from the consequences of unwise investments."
Indonesia's solution isn't IMF money, Shultz says. "The solution is to restore the confidence of the ethnic Chinese so they bring back the $80 billion they pulled out."
Japan is at the center of most of the Asian problem, Friedman says, and Japan doesn't need the IMF either: "Japan's been following a deflationary policy. It turned illiquid banks into insolvent banks just as the Fed did in the U.S. in the early 1930s. Our depression was caused by allowing the money stock to be reduced by a third.
"The Bank of Japan should print more money, raising monetary growth to 6%. Then let the weak banks go under and allow others to acquire the good assets. Just as the U.S. did during the savings and loan debacle."
The bad news: Even as Shultz and Friedman spoke, both parties in Congress were getting ready to agree on new spending programs, the Republicans having cravenly abandoned their efforts to reduce taxes. And both parties seemed close to agreeing to refund the IMF.
http://www.forbes.com/forbes/1998/1102/6210052a.html
