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Old May 12 2013, 02:49 PM   #15
Re: Greece's Underlying Policy Problem.

With Rogoff and Reinhart you probably refer to their bad paper on debt. I have no idea how you can imagine that my previous post is in any way influenced by them, high levels of public debt are rarely a problem if you have your own currency. I know that apart from their recent missteps they are fine economists but I never read anything by them.

Stagflation did not refute Keynesianism. That's Thatcherite bullshit and I am surprised that you have bought it. What happened in the seventies is that we became aware of the problem of inflation expectations and future monetary policy took this into account.
Keynes' General Theory wasn't about managing an ordinary recessions via decreasing the interest rate, it was about the dire need for fiscal policy in liquidity trap (i.e. when interest rates are close to zero and conventional monetary policy becomes ineffective). And as we are right now in a liquidity trap fiscal policy is what the doctor orders.

If you can come up with something better I am all ears. But so far your description of your preferred alternative, a socialist economy, is extremely vague.
The illegal we do immediately; the unconstitutional takes a little longer. - former US Secretary of State and unconvicted war criminal Henry Kissinger
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