Econamici blog

What’s Crippling the Recovery: Lack of Investment Demand or Too-Big-to-Lend Banks?

Quantitative Easing (QE) was supposed to stimulate the economy by encouraging investment with low interest money. That hasn’t happened, but why? Does no one want to borrow, or do banks not want to lend? My favorite financial columnist, Yves Smith, has laid out both theories.
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Joseph Stiglitz Is Right About Inequality, but for the Wrong Reason

Joseph Stiglitz says that “Inequality is Holding Back the Recovery”. He’s right, but he gives the wrong reason, that "our middle class is too weak to support the consumer spending that has historically driven our economic growth." This “Keynesian” spending model does not effectively address inequality and thus can lead
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Is Paul Krugman’s Liquidity Trap Really an Inequality Trap?

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.
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The Keynesian Stimulus Spending Fallacy

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
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How to (Really) End This Depression: a Response to Paul Krugman

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Animal Spirits, by Akerlof and Shiller

Yale Prof. Robert Shiller, author of Irrational Exuberance (2000; 2005), predicted the 2008 financial collapse years before it happened. Last year, Shiller partnered with UC Berkeley Prof. George Akerlof to produce Animal Spirits--elaborating on the psychology that inspires “irrational exuberance” and other mass human behavior that affects the economy.
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Can Invading a Small Third-World Country Stimulate the Economy?

Did Mussolini's 1935 invasion of Abyssinia help Italy escape the Depression?
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