Dear Foghorn Staff,
I read the Foghorn on a regular basis but have been disappointed by the uninformed and misguided economic analysis presented by Paul Panasiuk on the U.S. economy and political system.
In his latest article on the U.S. recession he argues the government is printing money, that this is causing a depreciation of the dollar, and that the government spends money on failing programs and wars. Furthermore, he compares the US to Zimbabwe, Iceland, the Weimar Republic and Argentina. He predicts that the US economy will collapse and that there will be a meltdown. Furthermore, Mr. Panasiuk argues that millions have lost jobs and that Americans continue to lose jobs.
First, Mr. Panasiuk’s criticisms regarding money supply are misguided because they are not based on reality. The U.S. government is elected by the people and the U.S. has an independent central bank that sets monetary policy independent from the rest of the government. The Federal Reserve Chairman Ben Bernanke is highly qualified in how to deal with financial crises, recessions, and using monetary policy to get the economy back on track. The same cannot be said of Zimbabwe, the Weimar Republic, Argentina or Iceland.
Second, Mr. Panasiuk does not consider alternative reasons for the loss of American jobs. Indeed, many Americans have lost their jobs, but after the recession has cleared there will be new jobs, which may require an updated skill set. Do we really want to keep autoworkers employed making SUVs that nobody wants to buy? Instead we need to build fuel efficient cars, invest in biotechnology, and be innovative and a global leader in high technology. Most of the jobs that have been lost have been in low-skilled labor, which has been negatively impacted by the development of new technology that replace these workers, the rise in the minimum wage, and the comparative advantage offered by low skilled labor in foreign countries. A recession offers companies to restructure and become more efficient thereby reaping greater profits in the future.
Third, Mr. Panasiuk does not offer any alternative solution for current U.S. government policy. Would he rather that the Federal Reserve not print money, thereby keeping interest rates high, making it more difficult for businesses to invest, and our exports expensive to foreign consumers? Would he rather have a tight fiscal policy and thereby not stimulate the economy through the business cycle? I am unclear as to what he would want the future to hold. It is easy to criticize and complain about wars, the economy, and politicians. But unless you can offer better solutions then I am afraid that these criticisms do not amount to much at all.
Department of Economics