These two articles are from a pro-privatization publication:
The Gold-Standard and the Perfect Economic StormReason Interview with former Jersey City Mayor Bret Schundler
By Anthony Randazzo
...
Randazzo: Given your background in basically selling economics research, what were the policy errors that led us to today's economic crisis?Schundler: That's an interesting question. A case can be made that what I think were policy errors were not errors at the time, just like a pharmaceutical may be the right prescription for an ailment, but then lead to problems when other pharmaceuticals, with which it doesn't mix well, are prescribed later.
In the wake of the post-9/11 global recession, central bankers throughout the world cut interest rates. Gold and commodity prices turned up almost immediately, but Western economies remained anemic for over a year, and overall producer and consumer inflation remained low. Central bankers faced a conundrum. Should they raise short-term interest rates, presuming rising commodity prices to be a harbinger of future inflation, or should they keep short-term rates low to spur economic growth?
They chose the latter course, and gold-standard Libertarians would say that this was a major error - that excessively-low interest rates since 2003 have caused an excessive expansion of credit throughout the world, and that this led directly to today's problems. Had central bankers not ignored the soaring price of gold for so long, had they hiked interest rates early enough and high enough to stabilize gold prices, we would not have had a housing bubble, we would not have had an over-capacity problem in other credit-sensitive sectors such as the auto industry, and we would not have had financial institutions everywhere going bankrupt today. They argue that we would have had slower growth since 2003, but that it would have been sustainable growth.
To avoid making such errors, gold-standard libertarians say central bankers should peg their currencies to a fixed-measure of value, such as gold.
Randazzo: Do you agree that today's problems are the result of these bad monetary policies, or is there a counterargument to what you just laid out?Schundler: The counterargument is that raising interest rates in 2003 to stabilize gold prices would have caused outright deflation, and that this would have put the economy through the same kind of wringer we are going through now-only several years earlier. This counterargument defends the central bankers' decision to keep rates low, and states that today's problems are the result of an unpredictable confluence of factors ultimately mixing together to create what might be called a "perfect storm," economically speaking.
These perfect storm economists would remind you that prices are a function of supply and demand, and that the tidal wave of inexpensive products that has been flooding the globe since China and India began freeing up and opening up their economies has been inherently deflationary. Keeping interest rates low, they argue, was the right response to this "supply boom." Expanding global credit allowed the increase in the global supply of goods to be matched by an increase in the global demand for goods, with rapid, non-inflationary, economic growth the direct result. Credit-sensitive demand for housing and automobiles naturally ticked up given this extended period of low interest rates, but given that general inflation remained under control, what makes low interest rates and people being able to afford a new house or a new car a bad thing? What makes non-inflationary prosperity a bad thing?
These perfect storm economists believe that if central bankers had tightened in 2003, they would have simply added the deflationary impact of rising interest rates to the deflationary impact of the Asian supply boom. Just as the West was starting to climb out of recession, falling prices would have signaled to economic players that they should cut production. Why would central bankers have wanted to do that, they ask? Why would they have wanted to treat non-inflationary economic growth as a bad thing that needed to be snuffed out, just because gold prices were rising?
Randazzo: What are the answers to this position by gold standard enthusiasts? Schundler: They'd say that monetary policies operate with a lag, and that you can't use current Consumer Price Index (CPI) readings to gage where your monetary policies will take you six months or a year down the road. You shouldn't look out your car's rear window while driving forwards. You should watch for what's ahead of you. And like it or not, they'd say, the world uses gold as its universal, fixed-measure of value; so if gold prices are rising, it is a signal that inflationary pressures and expectations are building, and that you should take immediate corrective action even if your CPI readings do not yet show a problem, and even if your economy still seems fragile.
Cont'd
http://www.reason.org/commentaries/randazzo_20081218.shtml--
And another article from the same publication:
"Perfect Storm" Could Accelerate Privatization TrendsMuniNet Guide Inverview with Reason's Leonard Gilroy
By Leonard C. Gilroy, AICP
On October 8, the Chicago City Council unanimously approved a historic $2.5 billion 99-year lease of Midway Airport, setting the stage for the first long-term lease of a U.S. airport (assuming federal approval). While others have leased portions of their facilities or have contracted with third-party vendors to provide certain services, the Midway deal is likely to go down in the history books as the first large-scale privatization of a public airport in the United States.
The Reason Foundation's Annual Privatization Report 2008 identifies Chicago as a "hotbed of local privatization," with the Midway transaction being preceded by the lease of the Chicago Skyway lease as well as several downtown parking facilities. The city is also currently pursuing a long-term lease of its downtown parking meter system.
Is privatization looming as large in other parts of the country? Could the increasing trend to form public-private partnerships gain momentum in light of this country’s economic downturn?
Leonard Gilroy, Director of Government Reform at Reason Foundation and editor of the Annual Privatization Report for the past three years, says the answer to both of those questions is "yes." In the interview that follows, he shares his many insights on privatization, and why we’re likely to see more of it...cont'd
http://www.reason.org/commentaries/gilroy_20081024.shtml
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