Is That A Faint Breeze or is the Wind Changing?: Summers makes an important point in passing that I’ve tried to repeatedly stress (ever since I heard it from Brad DeLong). Deficit-financed fiscal stimulus can be ill-advised in a healthy economy, much like to pouring water in a glass that’s already full... adding excess demand is likely to crowd out private borrowing and generate inflation, leading the Federal Reserve to “mop up the spill,” i.e., raise interest rates to ward off the extra inflation.
He is a simple minded economists who believes goods can flow smoothly from DC. He has no clue about skew and network effects.
In order for the regional economies to escape the Keynesian dictatorship, default is the first step.
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