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January 24, 2011
In Economic Recovery With No Growth Strategy in Logos 2011: Vol.10, Issue 1 Jeff Madrick says in relation to the US that the Obama government did rescue American's from a much worse state, but one year after the alleged end of the recession unemployment is 9.6 percent and there is no sign of a speed up in the economy. He asks: What should be done?
what should be done is more fiscal spending. Instead, what is going to happen is we are going to get more so-called quantitative easing from the Federal Reserve (that is, purchases of long term bonds), which would bring down long term interest rates, help to keep mortgage rates low, help to get business to spend more to borrow more, and help to get banks to lend more. That is what is going to be done. Having been schooled in Keynes, I think that we need both guns working simultaneously. We need fiscal policy, we need spending, and we need monetary policy, the so-called quantitative-easing.
Madrick's argument is that businesses are not going to lend unless there is demand for goods and services out there. There is not going to be demand for goods and services out there unless we get another fiscal stimulus to try to get the economy moving again.
He says that economics became neo-liberalism. It did not become conservative economics and the principle is that economies adjust on their own to optimal rates of economic growth. Keep government out. So they kept keep inflation low and deregulated. The one idea is that economies would adjust on their own. The result are crises in:
1982, 1987, 1989, 1994, 1997, 1998, 2000, and 2007-8. That is eight financial crises. The conventional wisdom has been that we handled all those crises. We did not handle all those crises. They all hurt the American economies significantly. They all cost jobs. They often resulted in recessions. They used up capital that should have been used for more productive purposes. These were the consequence of the blind deregulatory process.
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