Thursday, 11 December 2008

DeLong's answer

Brad DeLong has solved the financial crisis (co-opting the help of Keynes, Bernanke, Trichet, Brown, King, Geithner and Summers).

I must admit the conclusion he came to was not the one I expected. Note particularly that:
  • he disagrees with me on crowding-out - he thinks there is still net business investment to be crowded
  • regardless, he believes that business investment will not be a substantial source of demand in the near term
That's a bit disappointing, if he is right. I was hoping for a more positive outcome but I suppose that's why it's called a depression.

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