Macro Musings Blog
Sure to be regarded as a classic presentation. I would have preferred a minute or so of fear-mongering that we are the next japan, but you can't have everything....
not able to buy the whole explanation of Scott. I can not swallow that the financial crisis is a result, not because of, the recession caused by lack of money.I see the huge increase in interest rate as caused by financial crisis, and that as the cause of the monetary contraction. But perhaps He is right. But in the graphs I see a different secuence.
Suppose we observe a striker score a goal. What caused the goal to be scored: was it the assist from the player to the left; was it the defensive error by the defending team; was it the goalkeeper's split second decision to go the wrong direction when faced by the striker? It was of course all of those things; the goal is the visible result of a seamless whole chain of events. Thus you cannot do what Sumner wants to do, and specify a particular event caused the recession. It is illegitimate philosophically, don't you think ?Sumner has a preconception of how he thinks the world works, and cherry picks events to match his preconception.
In general, Scott's case is strong, and the policy implications are very strong. We need to go to heavy monetary stimulus, and not let up until the roof is on fire. BTW, the CPI now is about where it was in August, 2008.