The IMF/World Bank models tried to bring excess of demand of markets to zero, and eliminating deficitary behavior as much as possible. This is how they imposed budgetary constraints to countries during reforms. But the model did not include citizen as they assumed a trickle down effect.
Plus they added some extra "non quantifiable" requirements like open markets, deregulation and other ideological things.
Since people did not exist and trickle down did not happen, what they did was to pass all deficits to citizens. That resulted in recessive economies in the decade of failed reforms.
In countries like Zimbabwe you can't pass any more deficit to people. With minimal needs of humans for survival, illnesses, and almost no income, deficit is maximized. All the money that would go to many markets of goods is going to less markets and cause inflation and those markets of goods that get no money are just absent, so you have excess of liquidity in certain markets and inexistent markets for other goods and services.
Understanding the implications of the model with the new sector and no trickle down brings very interesting new elements to understand what will happen to an economy.
Fear DOES destroy economy. That is a fact, you can't deny. Economics depend on trust. If you don't trust somebody, you don't invest into him, don't buy his products and don't sell to him. If you fear that the customer you plan to sell something, might not be able to pay the product, you don't risk selling and make loss.
Exactly what I have been saying all this time. Fear makes recession worse. Yellow journalism of US media creates fear.
Fear cause americans to go to war with the emotional 9/11 emotional trauma, it makes americans to buy weapons to feel safe, it caused Bush to win during reelection in 2004, fear must get high ratings nowadays... but they forget that media relies on advertising, and since it is not something people need to survive, if they continue producing fear, they will run out of sponsors.
Short term rating? Or long term survival of press business? This is the decision american media will have to make.
In my country, when credit crunch started, I advised some journalists about the effect of fear, since we had a case of a bank which almost broke because a malicious false rumor spread about it being in bankruptcy, some years ago. Fear caused it. And I advised them not to cause fear and that helped a lot to keep stability here.
This is a very small country, and those who you see on TV, you often see where you go. It is like a small town. Any ambasador here could tell you the same.
