Re:The takeaway from six years of economic troubles? Keynes ...
by hga on Sunday November 02, 2014 @12:24PM
(#8547208)
That article does a great job of demolishing Kaletsky's declamations on the Great Depression and Recession. But this quote of him also caught my eye:
But governments and central banks usually panic during the liquidation phase, pushing interest rates below their natural rate again and boosting the money supply This artificial stimulus, especially if sustained for a long period, inevitably sets off another credit boom and the cycle begins anew.
Which is what sort of happened in Japan ... except for that "another credit boom" part.
As far as I know you don't have to be an Austrian to know about, let alone believe in the "pushing on a string" thesis; if you're not familiar with it, read the mises.ca article about what businessmen are really responding to.
Another thing to prop up the thesis is the "inverted yield curve" recession predictor, specifically short term interest rates suddenly rising above long term. The theory is that's because businesses are frantically borrowing in the short term to keep themselves afloat while they work their excess inventories down. If they survive that experience, no low or negative interest rates will interest them, so to speak, in resuming the intensity of the game that almost killed them.
But governments and central banks usually panic during the liquidation phase, pushing interest rates below their natural rate again and boosting the money supply This artificial stimulus, especially if sustained for a long period, inevitably sets off another credit boom and the cycle begins anew.
Which is what sort of happened in Japan ... except for that "another credit boom" part.
As far as I know you don't have to be an Austrian to know about, let alone believe in the "pushing on a string" thesis; if you're not familiar with it, read the mises.ca article about what businessmen are really responding to.
Another thing to prop up the thesis is the "inverted yield curve" recession predictor, specifically short term interest rates suddenly rising above long term. The theory is that's because businesses are frantically borrowing in the short term to keep themselves afloat while they work their excess inventories down. If they survive that experience, no low or negative interest rates will interest them, so to speak, in resuming the intensity of the game that almost killed them.