On the Brink of Fatal Policy Error

Advanced economies have no divine right to grow at Great Moderation rates: Japan’s, which grew at 5 percent annually during the 1980s, has grown by barely one percent per year since then.43 This may be one reason why forecasters and policy makers were taken so much by surprise by the depth of the 2007 recession. Not only were they failing to accoun

... See more

Only briefly, Friedman and Schwartz mention that the price level had not risen too quickly during the 1920s, and thus conclude that the period was not inflationary and so the causes of the depression could not have been inflationary. But the 1920s witnessed very fast economic growth, which would lead to a drop in prices. There was also heavy moneta

... See more

The reason behind this imbalance was understood by Marriner Eccles, chairman of the U.S. Federal Reserve from 1934 to 1948, who argued that high levels of income inequality in the United States were in effect “a giant suction pump” that had “drawn into a few hands an increasing portion of currently produced wealth.” Because the rich consume a far l

... See more

So, if you truly want a world in which asset prices come down to reality, debt is reduced, and speculation is at a minimum, you are going to have to vote for leadership that will not react when inflation is high, unemployment is high, growth is negative, the banks are in trouble, or deflation is an issue. I don’t know many people that want this (w

... See more