Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
1. You could either have a federal investment arm to create demand in times of need. This wouldn't be needed on a massive scale at all times,

Sure, it would only need to be maybe 2-5 % of total GDP when you average it over every year of operation.

as liquidity traps are rare,

Only if you run silly, growth-destroying interest rate policies like Taylor rules. Under a more sensible zero interest rate policy, you are always in a "liquidity trap." Because it's not actually a "liquidity trap." It the zero bound on nominal interest rates. Liquidity has nothing to do with it.

Alternately or complementary, you could create a strong federal financial regulatory agency to fight debt buildups, including in the private sector.

This requires a public sector able and willing to print and spend money as needed, in order to compensate for waxing and waning private demand.

2. A strong currency protects the purchasing power of consumers,

So what? Protecting the (purchasing) power of "consumers" is not an objective of left-wing policy. "Consumers" includes plenty of people whose interests are not ordinarily considered important in the formulation of left-wing policy.

making vital imports like gasoline, coffee, bananas (and foreign vacations!) cheaper,

At the cost of leaving a poorer country for the next generation. Foreign goods cost what they cost. You're not going to be able to change what they cost without fancy diplomatic footwork or old-fashioned gunboat diplomacy. When you use your "strong currency," so-called, to obtain cheap vacations, you are paying for those vacations with your children's wealth.

while imposing a powerful competitive pressure on the export industry, making it lean and constantly focused on improvement.

Because raising the average quality of your firms by destroying solvent and, on their merits, profitable going concerns because they are not profitable enough is obviously an awesome way to encourage industrial development.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Mar 17th, 2012 at 09:42:13 PM EST
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