Failure of stimulus packages (letter)by Peter D. HowardNews Weekly
, June 27, 2009
The realistic assessment from Peter Westmore in his editorial, "Implications of the budget black hole" (News Weekly
, May 16), that increased taxes will harm business and increase unemployment, and that last year's budget surplus was blown on two failed attempts at stimulus cash handouts contrasts with the misplaced ideas of ANZ chief economist Saul Eslake in the same issue. Mr Eslake believes that easing of monetary policy and large budget deficits are preferable to "the near-term risks of doing nothing".
Even worse, the London Economist
was quoted as saying, "The Depression showed how damaging it can be if governments don't step in when the rest of the economy seizes up." Has nothing been learned?
Dr Thomas E. Woods, Jr, in his book Meltdown
(Washington DC: Regnery Publishing, 2009), explains that in the US recession of 1920-21 production fell by 21 per cent by the middle of 1920, with worse conditions than in 1930, yet recovery was swift because the US Administration and Federal Reserve refrained from public works spending, government deficits or inflationary monetary policy. Instead there was a drastic cleaning up of credit weakness and reduction in the costs of production, allowing the free play of private enterprise.
Conversely, Woods asserts, the post-1929 Great Depression was fuelled by Hoover and then F.D. Roosevelt raising taxes, expanding public works spending, establishing welfare programs, destroying existing crops, imposing acreage reduction requirements, and legislating for cartels to establish minimum selling prices and to limit output. We all know how deep and long that fiasco was.
The plight of Japan from 18 years ago also confirms the failure of stimulus packages and interest rates at zero.Peter D. Howard,