The Great Debate UK

from MacroScope:

Did France cause The Great Depression?

Economist Douglas Irwin of Dartmouth College has stirred up a bit of a fuss by concluding in some academic research that it was France, not the United States, that was most to blame for The Great Depression.

Irwin's theory, in a paper posted here by the National Bureau of Economic Research, is that France created an artificial shortage of gold reserves when it increased its share from 7 percent to 27 percent between 1927 and 1932.  Because major currencies at the time were backed by gold under the Gold Standard, this put other countries under enormous deflationary pressure.

To prove his point, Irwin ran a model looking at what would have happened without the French move. The results:

Counterfactual simulations indicate that world prices would have increased slightly between 1929 and 1933, instead of declining calamitously.

Why the world needs a weaker dollar

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IRAN-CURRENCY/RATE/Kathleen Brooks is research director at forex.com. The opinions expressed are her own.

Ever since the last Federal Reserve meeting when the prospect of further policy stimulus for the US gripped the market, dollar weakness has been the dominant theme in FX. The Fed action is considered in some quarters as a backdoor form of currency devaluation, and there has been talk of a global “currency war” as a result.

from The Great Debate:

Here lies the Great American Consumer

jamessaft1.jpg--James Saft is a Reuters columnist. The opinions expressed are his own--

Rest in peace, Great American Consumer. We will not see your like again.

"Cash-for-clunkers" aside, consumers seem bent on actually paying back debt rather than racking it up, a change that if sustained, as it is likely to be, will dampen economic growth not for months but for years, and not just in the U.S.

Outstanding U.S. consumer borrowing fell by a jaw-dropping $21.6 billion in July, according to data released this week by the Federal Reserve, five times more than analysts expected and the second largest monthly drop since the end of World War II.

Predicting the economic effects of swine flu

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dm1- Marie Diron is senior economist at Oxford Economics. The opinions expressed are her own -

A swine flu pandemic would affect the economy via various channels involving supply and demand.

from The Great Debate:

The ugly attraction of fast shrinking Japan

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Sure, seeing your economy shrink at a 15 percent annual clip is depressing, quite literally, but if you believe in even a tepid global economic recovery in the second half, then Japan is actually attractive.

There is no way to sugar coat the first quarter Japanese gross domestic product figures released on Wednesday: they are breathtakingly bad viewed from virtually any angle.

Deflation? It’s inflation you need to watch

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– David Kuo is a director at the financial Web site The Motley Fool. The views expressed are his own. –

david-kuo_motley-foolWhat are consumers supposed to make of the latest inflation numbers? Do we have inflation, deflation or a bit of stagflation?

from The Great Debate:

Fighting deflation globally ain’t easy

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

With the U.S., Japan and Britain -- nearly 40 percent of the global economy -- facing the threat of deflation, it's going to be just too easy for one, two or all three of them to get the policy response horribly wrong.

The global economy is so connected, and our experience with similar situations so limited that the scope for error is huge.

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