Krugman, in this post, argues that a big G, and its deficits, might have saved the world from deep depressions. Then in this post argues:
"they’ve [post 80s recessions] proved hard to end (not officially, but in terms of employment), precisely because housing — which is the main thing that responds to monetary policy — has to rise above normal levels rather than recover from an interest-imposed slump."
So, my question is, Big G slows the downfall, but Big H slows the recovery. Is it not more likely that Big G going in and going out cause the same lack of response?
The recession is a slow restructuring because G slows down the restructuring process and also crowds out resources during the recovery. I would find it difficult to believe that bigness of G only affects the economy asymmetrically.
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