There were two reasons why the cure did not work better. First, the program of government spending was never carried out to the full extent that would have been necessary to bring the economy up to full employment... such all-out spending was quite impossible; indeed, even a modest program of government expenditure soon brought murmurs that federal power was overstepping its traditional bounds. To make matters worse, the Federal Reserve Board was more concerned about inflation (at the bottom of a depression!) than of unemployment, so that policies were established to discourage bank lending... government spending was meant as a helping hand for business. It was interpreted by business as a threatening gesture.. Hence, every effort of the government to undertake a program of sufficient magnitude to mop up all the unemployed...was assailed as further evidence of Socialist design.(emphasis the author's) Originally written by Robert L. Heilbroner in this book in 1953! (talking about the Great Depression). The more things change.
Friday, November 12, 2010
What Paul Krugman really means to say.
Krugman tends to repeat himself in his op-eds and blog posts about how fiscal stimulus wasn't big enough and didn't really happen. This quote could have been written by Krugman but wasn't: