Re: [OPE-L] The state of the US economy according to The Levy Economics Institute

From: Jerry Levy (jerry_levy@VERIZON.NET)
Date: Wed Jan 23 2008 - 09:14:40 EST

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The Levy Economics Institute has released another analysis by Godley et al.: The U.S. Economy: Is There a Way Out of the Woods?
<snip> It argues that a significant drop in borrowing is likely to take place in the coming quarters, with severe consequences for growth and  unemployment, unless (1) the U.S. dollar is allowed to continue its fall and thus complete the recovery in the U.S. external imbalance, and (2) fiscal policy shifts its course€”as it did in the 2001 recession.
    See: <http://www.levy.org/vdoc.aspx?docid=964>
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Hi Dave:

Thanks for the reference. (1) is likely and (2) is in the works.

How far the dollar has to fall and whether the US dollar will be 
able to maintain the role that it has had since Breton Woods are open questions, though. Similarly, it's not clear yet what the shift in fiscal policy will be (e.g. what type of tax cuts will be approved?) and whether it's a matter of too little too late (a belief that triggered the fall in the stock markets in Europe and Asia the other day).  I wouldn't underestimate, though, the ability of the US government to shift the burden of the recession to other economies: they have a lot of leverage that they can use.

In solidarity, Jerry

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