Paul Krugman says the economy suffers from a “liquidity trap” due to insufficient demand. In my view, we’re in an “inequality trap” as the One Percent, big corporations and banks hoard cash, starving small businesses for capital. . . . → Read More: Is Paul Krugman’s Liquidity Trap Really an Inequality Trap?
It’s a truism of pop Keynesian economics that consumer spending drives the economy; if spending slows in a recession; government must make up the difference. In reality, consumer spending merely signals what consumers want; producers may be unable or unwilling to deliver. Government spending may compensate—or make matters worse—depending on the type of spending and whether it’s financed by progressive taxes or by borrowing. . . . → Read More: The Keynesian Stimulus Spending Fallacy
In the May 24 New York Review of Books, Paul Krugman writes, “The truth is that recovery would be almost ridiculously easy to achieve; all we need is to reverse the austerity policies of the past couple of years and temporarily boost spending.” He continues, “… The strong measures that would all go a long . . . → Read More: How to (Really) End This Depression: a Response to Paul Krugman
As I wrote in Part I, the deficit hawks legitimately claim that huge deficits will hinder investment and kill jobs. But their solutions would make matters worse. What are those solutions? What are alternatives? A leading hawk, C. Fred Bergsten of the Peterson Institute for International Economics, proposes three control measures: containing Medicare and Medicaid . . . → Read More: Deficit Hawk, Progressive Style, Part II
Louis Uchitelle is absolutely correct that President-elect Barack Obama’s spending plan may fail – or worse, backfire (“Maybe It Can’t: A Trap in Obama’s Spending Plan,” Week in Review, Dec. 21). Spending on infrastructure, even green infrastructure, is a relatively slow, low-return investment. To rebuild the economy right now, we need fast, high-return investment, public . . . → Read More: To Rebuild the Economy, People are the Best Investment
In The Great Crash of 2008, Mason Gaffney explained our current crisis as a manifestation of the roughly eighteen year real estate cycle–disastrously amplified by bad policy. Now he has published a sequel: How to Thaw Credit, Now and Forever. His solution may shock some readers, especially if they haven’t seen his earlier essay: Stimulus: . . . → Read More: How to Thaw Credit, Now and Forever by Mason Gaffney