Very interesting Opinion piece in the FT on the serch for new
solution to our economic woes. http://www.ft.com/cms/s/0/369d77da-483f-11e2-a1c0-00144feab49a.html#axzz2FFMoaPr1 The jist is that Keynes, having
been on the scrap heap for 20 years or more, is now being dusted of across the
pond by byLawrence
Summers, the former Treasury secretary, Paul Krugman, the
economist-columnist, and the US Federal Reserve chairman Ben
Bernanke, came with the belief that short-term fiscal and monetary
expansion was needed to offset the collapse of the housing market.
The issue is that caused of the recession were the very high levels of personal
and public debt, which became apparent during the credit crunch; caused by
under-capitalized banks. To resolve this people, governments and banks have to
become credit worthy, stimulating demand artificially is likely to cause deeper
long term problems, so it doesn't seem probable that Keynes will have the
answer. The one area if wriggle room is in the private sector, where large
corporates are sitting on cash, unlocking these liquid assets may provide part
of the answer.
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