Folks, before we all condemn the Author of the Article with the original Caption above, appearing on Ghanaweb.com on July 26, 2010, to some Academic wastewater pond or a garbage dump of rabid ignoramuses, we ought to delve deeper into this issue and help ourselves to look more seriously at his suppositions.
We would be greatly helped to such end by checking, among other sources, the following Web Sites:
1). http://www.monetary.org/toestalk.htm
2). http://www.informationclearinghouse.info/article21116.htm
I chose these two Web Sites for their seemingly extreme but cogent views on the US Economy and how it has been handled recently under various levels of stress. I think our answer to properly handle our Liquidity impact on Ghana’s Economy may be found between these views.
We should all remember that even during the Presidency of Ronald Reagan (and his most favorite contemporary, Margaret Thatcher, of UK) the US Economy saw some large Government interventions, while the chief Economic mastermind behind Reagan was Milton Friedman of all people, the very Economist and Nobel Laureate who had turned against Keynesianism and Government intervention.
The fact remains that even as Milton despised Government intervention in the US Economy that it would create false abundance of real wealth, (such as an injection of more cash into the system, which was believed to be inflationary), the US Government intervened to bail out financial institutions and Banks involved in the Savings and Loans Scandal, and engaged in increased Military Expeditions that were not backed by any Funding generated by Productivity. The Economy then had to resort to borrowing to keep it going. Hence, the current trend of Deficit spending.
On the balance, however, it is empirically proven that some Government intrusion on the Economy, even with some cash infusion beyond normal Productivity- generated Liquidity levels, has worked before. The days of the Roosevelts, when the Social Security system, Unemployment Benefits, Medicaid and other Social benefits were created to help bring the US out of the Depression caused by the WW II, are cited as examples of that phenomenon.
Currently, the dispute between the Republicans and, mainly, the Democrats over the extension of the Unemployment Benefits to people that still need them, is picking up the same argument as to whether or not such infusion of cash into the USA Economic system is necessary. Many strongly believe the Unemployment Benefits form such monetary infusion, and is needed to boost the Economy. The good old Multiplier Effect is anticipated with that extension and has been believed to work in all the past that the Benefits have existed.
So, some well-thought out monetary infusion seem to be necessary some times. That does not mean we should be reckless about it.
With the Global trend today being going back to use Gold as an essential backbone of many Economies, we probably should think about using some of our Gold reserves for backing any meaningful cash infusions to keep our Economy going, at least on temporary basis, until we are able to diversify our Economy enough to regain much strength. We should understand that many of the Western Economies are now frantically building their Gold reserves for the obvious reasons. Hence, the rising price of the commodity.
But we should also admit that not all the factors that existed in those days of the Roosevelts exist today. And even one new, hitherto non-existent factor could change the expected outcome.
Similarly, modern trend has shown many signs of defying the known and established Economic paradigm. Ghana's own Economic survival and emergence out of the ‘Kalabule’ days, present a continued source of study into the interplay of real, practical, largely informal Economic activities, both at the Micro- and Macro- levels.
The fact that some real but often missed activities in the Society modify the expected outcome of a Macroeconomic assessment should be seriously considered to ensure that we take a look at our special situation, fully, before lifting from some textbook what we should expect from particular line of action intended.
Long Live Ghana!!!
