Ed Nolan: If you remember your basic college econ course, you’ll know that the first line of defense against a recession is fiscal policy. When the economy goes into a slump, spending rises on unemployment compensation, food stamps, and other benefits. At the same time, tax receipts, which are linked to income, decrease. Because the spending increase plus the tax decrease automatically cushion the slump, economists call them automatic stabilizers.
OK, we see recessions happening abut every eight years at DC regime change time, debt/GDP rising and potential growth going opposite debt/GDP. Now, Ed, what happens when one of your econ students actually putsu[ this chart, representing 1/5 of the global economy? They get confused, they think the economy is multi-equilibrium, and Magic Walrus dies not work.
The correct answer
The Swamp is counter cyclical over the generational period, some 40 years. Then we do a monetary regime change and the correction is often brutal, generally we are stuck with the drunken helicopter pilot.. The good news is that we get better at it, the body count seems to have dropped this cycle..
No comments:
Post a Comment