End this Depression Never?

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Lar­ry Sum­mers’ speech at the IMF has pro­voked a flur­ry of respons­es from New Key­ne­sian econ­o­mists that imply that Sum­mers has locat­ed the “Holy Grail of Macro­eco­nom­ics” – and that it was a poi­soned chal­ice.

Sec­u­lar stag­na­tion”, Sum­mers sug­gest­ed, was the real expla­na­tion for the con­tin­u­ing slump, and it had been with us for long before this cri­sis began. Its vis­i­bil­i­ty was obscured by the sub­prime bub­ble, but once that burst, it was evi­dent.

So the cri­sis itself was a sideshow. The real sto­ry is about inad­e­quate pri­vate sec­tor demand, which may have exist­ed for decades. Gen­er­at­ing ade­quate demand in the future may require a per­ma­nent stim­u­lus from the gov­ern­ment – mean­ing both the Con­gress and the Fed.

Read the rest of this post here. (Health warn­ing: con­tains sub­stan­tial por­tions of irony. May exceed your dai­ly allowance).

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.