He is basically right, this is the Minsky snap back problem. The economy will eventually snap back, even if the economy contracts first. So, if oil prices rise with the snap back, then either the economy has gotten energy efficient, or the economy is exporting energy products. DC debt costs will also rise dramatically in the snap back, so we will have two years of a wrenching deficit reduction.
Yglesias says price is a signal:
In other words, if some initiative raises the price of gas that’s more likely a sign the initiative is promising than a sign that it’s failing.
Essentially he is right. When the Fed pushes more debt on government, government spends on energy and energy prices jump, signalling that is time to stop growing government and start selling energy. So for all you Keynesians in denial about energy shortages, this is what your push does, it causes us to become a commodity exporter.
No comments:
Post a Comment