OK, I exaggerate slightly - but the basic thrust of this article echos what I've been saying over the last few months albeit with considerably more tact and diplomacy than I'd use.
The International Monetary Fund has warned of "worrisome parallels" between the current global crisis and the Great Depression, despite the unprecedented steps already taken by central banks and governments worldwide.
Yep - there are indeed parallels between this current crisis and the Great Depression because they both have the same fundamental causes - globalisation. What amazes me, though, is that they are prescribing the same treatment for the condition that was applied at the time of the Great Depression even though they know it didn't work then. Why would it work now?
Especially as the globalisation is even more advanced today than it was in the thirties.
While the credit boom in the 1920s was largely specific to the US, the boom during 2004-2007 was global, with increased leverage and risk-taking in advanced economies and many emerging economies. Levels of integration are now much higher than during the inter-war period, so US financial shocks have a larger impact," it said.
And the countries that avoided the effects of the Great Depression were those countries which had resisted globalisation - particularly Japan and the Soviet Union - and remained protectionist and nationalist.
The really ironic thing is that, right at the end of the piece they nail it.
Synchronised world recessions striking all major regions are "historically rare" events, the Fund said.
Exactly! Because globalisation is an historically rare event. This is only the third time its happened and, curiously enough, it's the third time its ended in tears. Capitalism is market based economics and markets have to go through periodic corrections - that is why you have economic cycles of boom and bust. When the market is global the developed nations sustain their economy with debt to avoid those corrections while capital flows out to the developing nations.
As a result you get a longer period of boom (sustained only by debt), but you also get a massive bust at the end of it. The market has to correct and, unless you protect your economy to allow for the correction, the market will correct itself.
You can not maintain a high wage, high living standard economy when you are competing globally with low wage, low living standards economies in a free market. It is the most simple basic rule of market economics - supply and demand.
Every economist knows this, but they still think they can ignore it?