Monday, October 27, 2008

Rodrik says now is the time for naked self-interest

Dani Rodrik:
Emerging markets have every right to say that they are being swept under by a crisis that is not their own doing. But the real reason the rest of the world needs to move on this front is naked self-interest. Combine a deep recession in the advanced countries with an uncontrolled depreciation of emerging-market currencies, and the pressure to erect trade barriers in the U.S. and Europe will be impossible to withstand. A vicious cycle of unemployment and protectionism feeding on each other a la 1930s could transform the deep recession everyone is already expecting into a second great depression. It can get worse.
Regarding great depressions Greg Mankiw writes, "We have indeed learned a lot over the last 80 years. But you should take that economic forecast, like all others, with more than a single grain of salt."

And, the question must be broached: Did the author of Ben Bernanke's ESSAYS ON THE GREAT DEPRESSION engineer the current market turmoil?

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