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The Forum > Article Comments > Neo-liberalism and the rise of stagflation > Comments

Neo-liberalism and the rise of stagflation : Comments

By Marko Beljac, published 22/7/2008

After decades of economic reform we have ended up with stagflation in the industrial West and in Australia we are still reliant on commodity prices.

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Try looking at the domestic regulatory environment and have a closer look at local and state government regulation,aside financial influences
Posted by Dallas, Tuesday, 22 July 2008 4:06:36 PM
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I agree that Neo-liberalism thought is a major cause of our current financial crisis, but I disagree with the causes you have discussed in your article. Secondly, stagflation, I ask what is the problem with no inflation, this provides stability and predictabilty of the value of goods and savings. In other words our money is not devalued by inflation or over valued by deflation.

Firstly to suggest that a lack of regulation is the cause and blaming the problems on unregulated markets can't be true. The government tariffs on various commodities and the Central Banks are two major causes (but not the only causes) of our financial crisis. To understand this you must look back at how they operate in our economy and the effects they have.

We can probably agree that the extention of credit by the banks is a major cause of the financial crisis. If you closely look at the causes behind the banks behaviour this is driven by the people desire to own house, reflected in the voting in of a democratic government, that loosens credit via the central bank in one of two ways through cheaper money or fiat money. Ultimately the bankers understand that the risk lies with socially responsible government and takes risks they otherwise wouldn't if their heads were on the chopping block. A socially responsible government is buying votes by enabling people to access credit, the banks will naturally take advatage of easy cash. So when the money dried up and COD's (and othe financail instruments) defaulted the government funded these by printing money. The banks won, the hedge funds won and took their money an invested out of the financial markets and into the commodity market. This wad of cash caused inflation of fuel and other commodities.

The cause ultimatley lies with our highly regulated governments and Central banks. More regulation will cause problems
Posted by Toucan, Tuesday, 22 July 2008 6:34:22 PM
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Stagflation is defined as a stagnant economy with inflation, typically low to negative growth, high unemployment, and high inflation. This is typically a symptom of gov over expenditure.

What is happenning in Australia is high inflation due to an over exuberant economy, and the financial crisis has nothing to do with what is happenning in Aus.

The overexpenditure on Iraq and the lax controls on debt have contributed to a mild case of stagflation in the USA, and has dampened the world economy, but the world economy is anything but stagnant. The main emphasis to control inflation from Aus to China is to try and put the brakes on over heated economy to stop too much money chasing too little resources.

Please next time don't throw around phrases like stagflation when you don't know what they mean.
Posted by Shadow Minister, Wednesday, 23 July 2008 12:08:41 PM
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