On Fri, 22 Oct 2010 08:24:12 -0400 Wojtek S <wsoko52 at gmail.com> writes:
> Doug: "deflation is a good thing. That's bonkers.:
Back in the 1920s didn't Pigou and most other neoclassical economists back then think that deflation was necessary for economic recovery following a crash?
And on the other hand, wasn't one of Keynes's arguments for expansionary fiscal and monetary policies, the notion that such policies would cause price inflation which, since wage hikes would lag behind, result in lower real wages (as opposed to money wages), thereby encouraging businesses to begin hiring workers? In other words, achieving the same thing that people like Pigou had hoped to achieve through deflation, without the risks of causing an uncontrollable downwards spiral.
Jim Farmelant http://independent.academia.edu/JimFarmelant
>
> [WS:] Sure. For one thing, it would wipe out most of my
> retirement
> savings, so it must be bonkers :)
>
> But let's play a devil's advocate and put undesirable social
> consequences aside for a while. If gov monetary policy results in
> inflation of asset value, this does little to stimulate the economy
> -
> as the government stimulus sits unproductively. There seem to be
> only
> two ways out of this situation - gov switching to direct purchases
> (fiscal policy) - as Richard Koo and Krugman advocate, and
> deflation
> of assets to the point that it is more profitable to invest in
> productive activities instead. Since the former is politically
> toxic,
> the latter seems to be the only way out.
>
> >From that pov, deflation is not bonkers - it is a real solution -
> one
> that is politically preferable by neo-libs. I do not think these
> people will be swayed by the argument pointing to dire social
> consequences of their solution - they do not give a flying fuck as
> long as their net worth appreciates. They are the new l'etat c'est
> moi aristocracy - they only thing that can get the idea of
> self-importance out of their heads is the guillotine.
>
> Wojtek
>
>
>
>
>
> On Fri, Oct 22, 2010 at 7:37 AM, Doug Henwood <dhenwood at panix.com>
> wrote:
> >
> > On Oct 21, 2010, at 11:35 PM, Jeffrey Fisher wrote:
> >
> >> Maybe I wasn't clear about this, or maybe it's an obnoxious
> question, and I
> >> should just go read the book, but I'm not sure that would help
> me. I'm
> >> trying to understand, *if* the guy accurately predicted the bust,
> do we have
> >> a way of explaining how his paradigm is wrong but his results
> were right
> >> (this time)?
> >
> > I'll be charitable and say that Austrian economics has a point or
> two. Extended credit booms end in sadness. But where I think they're
> wrong is seeing deficit spending in a bust like this as also
> inflationary. He sees/they see no risk in deflation - recall that he
> said that deflation is a good thing. That's bonkers.
> >
> > Doug
> > ___________________________________
> > http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk
> >
>
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