JF Kennedy 1962 speech
Posted by WARREN MOSLER on November 23rd, 2009
JFKennedy in his 1962 speech at Yale addressed these very same issues:
“For the great enemy of truth is very often not the lie–deliberate, contrived and dishonest–but the myth–persistent, persuasive, and unrealistic. Too often we hold fast to the cliches of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought. Mythology distracts us everywhere–in government as in business, in politics as in economics, in foreign affairs as in domestic affairs. But today I want to particularly consider the myth and reality in our national economy…..â€
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November 23rd, 2009 at 2:08 pm
Not sure if this is the right place for this but it raises some interesting monetary issues embroiling a lot of countries.
Reuters reports attempts by many countries to stop the rise of their currencies against the US dollar by introducing various forms of capital controls (see below). This is instead of buying US dollars. I think an earlier post you made indicated some countries felt they had reached the end of the line with US dollar purchases because they had become excessively large (I’m not sure I follow that since a country can sell any quantity of its own currency, assuming it’s free floating).
In previous posts I believe you indicated that other countries buying US dollars amounts to a subsidy to their export sectors at the expense of imports and is paid for as a decline in the general standard of living due to the increased cost of imports. You also noted that the export oriented policy implied by this policy also implied tight fiscal policy. I hope I got that right – I don’t want to put words in your mouth!
Of course a higher US dollar means the US gets lots of stuff more cheaply that it otherwise would!
Would it be correct to conclude that from the perspective of these contries some form of capital controls is a preferred policy since it doesn’t necessarily keep the exchange rate down but smoothes out volatility? Would the countries just be better off accepting the higher value of their currencies and supporting their internal markets through fiscal policy? I do wonder about that because if the currency increase is long-lived it’s one thing, but if the currency is fluctuating a lot then is it still a good idea?
FACTBOX-Capital controls on the rise around the world
Thu Nov 19, 2009 10:32am EST
LONDON, Nov 19 (Reuters) – Authorities from Brasilia to
Moscow to Jakarta are moving to curb what they say are ‘hot
money’ speculative flows fuelling rapid currency appreciation
and destabilising their recovering economies.
With currency market intervention seen as increasingly
inflationary, governments are resorting to direct capital
controls to prevent local bubbles expanding and bursting.
In contrast to controls imposed by emerging economies at the
height of the global financial crisis last year, the latest
measures are aimed at slowing massive capital flows from
investors seeking higher yields amid the persistence of
near-zero interest rates in the biggest developed economies.
For related story double click on [ID:nLJ437136]
Below are some of the measures that emerging economies have
either taken or are considering taking:
ASIA
TAIWAN
Taiwan this month imposed a ban on foreign funds investing
in local time deposits, in a move seen designed to fend off
appreciation pressures on the Taiwan dollar TWD=.
INDONESIA
Indonesian officials have downplayed the prospect of capital
controls after comments this week from monetary policymakers
about possible curbs on foreign holdings of short-term central
bank debt knocked the rupiah currency IDR=.
But Indonesia’s central bank was studying a possible limit
on the foreign ownership of one-month central bank debt as an
option to control hot money flows, a source told Reuters.
[ID:nJAK492570]
SOUTH KOREA
South Korea this week announced measures to tighten control
over foreign exchange liquidity, including restrictions on
currency forwards trading. The moves are expected to ease
appreciation pressures on the export-focused country’s won
currency KRW=, which hit 14-month highs this month.
[ID:nSEO366]
INDIA
India’s finance secretary on Thursday denied a newspaper
report that the government was planning to cap overseas
borrowing by Indian firms. [ID:nDEL296681]
The finance minister has said India had the tools to deal
with the influx of foreign capital if it became disruptive but
this was not a concern yet. [ID:nBOM506984]
LATIN AMERICA
BRAZIL
Brazil this week unveiled a 1.5-percent tax on foreign
investors converting American Depositary Receipts issued by
Brazilian companies into receipts for shares issued onshore.
Last month, authorities announced a two percent tax on
foreign investment in Brazilian equities and fixed-income
securities to curb inflows that have driven the real currency
BRL= 34 percent up against the dollar this year.
CHILE
Chile’s finance minister on Thursday repeated a warning made
last week that the government would act to curb the strength of
the peso CLP=CL, which has surged over 20 percent against the
dollar this year.
COLOMBIA
Colombia has halted the monetizing of dollars of the state
assets it holds abroad as part of measures unveiled last month
to reduce the strength of its peso COP=RR.
EMERGING EUROPE
KAZAKHSTAN
Kazakhstan has introduced legislation that would allow it to
enforce capital controls if necessary but the authorities have
not used the option.
RUSSIA
Moscow has allowed its rouble currency to scale new highs
versus its euro-dollar basket RUS=MCX but the central bank has
said it could in theory consider a Brazilian-style tax on
foreign capital flows. However, it stressed this week that it is
against the re-introduction of capital controls and would prefer
“soft measures” such as the monitoring of external borrowing of
state-controlled firms. [ID:nLI559680]
TURKEY
Turkey’s constitutional court last month ruled in favour of
making withholding tax on securities equal for domestic and
foreign investors. Turkey scrapped the withholding tax for
foreigners in 2006.
The ruling will go into effect nine months after
publication, and in the meantime the government is working on
fresh measures.
The court ruling is not a government-imposed capital control
but analysts say it has the same impact on flows.
AFRICA
SOUTH AFRICA
South Africa last month eased foreign exchange controls on
domestic companies, increasing the limit for company
applications to make outward investment and removing a 180-day
rule deadline for companies to convert their foreign exchange
into rand.
The rand ZAR= has risen 25 percent against the dollar this
year.
(Compiled by Sebastian Tong and Carolyn Cohn)
Reply
November 23rd, 2009 at 2:36 pm
Apparently someone has already written a book on this same idea that JFK espoused. Aptly titled too, and pretty much sums up CNBC ‘analysts’.
http://en.wikipedia.org/wiki/On_Bullshit
Reply
November 23rd, 2009 at 2:50 pm
Warren, are you considering submitting any editorials to major media outlets? I sat and sadly read today’s NYTimes piece on debt today and wondered, why am I not hearing any counterpoints? Maybe you have tried and been rejected for sounding to antithetical to mainstream understanding. At any rate, I would suggest writing a one pager for mainstream consumption. You could start it by saying “what if everything we thought we knew about debt and deficit was a lie?” etc. I know you are doing some speeches at tea party rallies but those might be considered “career enders” based on some of the people showing up at these rallies.
Just my thoughts.
cheers
Jason
Reply
Scott Fullwiler Reply:
November 23rd, 2009 at 3:16 pm
Good points, Jason!
This might be of interest, in the same vein:
http://neweconomicperspectives.blogspot.com/2009/11/what-if-government-just-prints-money.html
Best,
Scott
Reply
November 23rd, 2009 at 3:35 pm
FAO Keith Newman:
Why is the US dollar popular with carry traders but not the British pound? The main difference between the two countries is that 99% of UK quantitative easing involved UK government bonds, while in the US the equivalent proportion was around 20%: the remaining 80% being used to purchase private sector bonds.
I.e. the UK channelled new money towards UK households and UK businesses big and small, whereas the US channelled new money into the pockets of professional gamblers – sorry I meant rich individuals and institutions: you know – the sort who run out and buy strange South American securities with their newly acquired hoard of cash.
At least that’s my theory.
Reply
November 23rd, 2009 at 7:11 pm
Warren those Skull and Bones dudes are a scary bunch, you are a brave man! I am with you!
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