tag:blogger.com,1999:blog-7179048494901365426.post2018563223201148711..comments2024-01-16T03:21:37.695-08:00Comments on Gancho: Stiglitz on Mexicopchttp://www.blogger.com/profile/13973333514392213258noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7179048494901365426.post-53475984343404142412009-11-21T09:25:01.695-08:002009-11-21T09:25:01.695-08:00"But if not ... well, the peso should have be..."But if not ... well, the peso should have been allowed to fall to 20.<br /><br />That's a sentiment I think you hear and read a lot here, from a pretty wide spectrum of commentators. <br /><br />Much obliged for the analysis.pchttps://www.blogger.com/profile/13973333514392213258noreply@blogger.comtag:blogger.com,1999:blog-7179048494901365426.post-31711949430510953852009-11-21T06:55:56.830-08:002009-11-21T06:55:56.830-08:00I can't give a number, lacking an econometric ...I can't give a number, lacking an econometric model of the Mexican economy, but the country dug itself a hole. <br /><br />The first problem came at the central bank, which panicked when Comercial Mexicana declared bankruptcy. They worried that a further drop in the peso might bankrupt too many Mexican corporations with hidden dollar liabilities. They also (with less justification) feared a jump in inflation. I won't second-guess that decision, because I assume that they had information that I don't. But if not ... well, the peso should have been allowed to fall to 20. <br /><br />The second was that there wasn't much of a stimulus package at all. The government should have announced a big one, larger than half the federal budget, and shoved it out the door. If the bond market panicked, then they could reverse it: it's hard to imagine things getting much worse.<br /><br />I don't understand Stiglitz's point about the banks, though.Noel Maurerhttp://www.noelmaurer.comnoreply@blogger.com