My first re-posting! Not a sing of laziness I swear. Just that this guy has said something very well that I had been struggling to articulate.
Our biggest economic policy problem right now is vocabulary. Twenty years of prosperity has left us with only one perspective. A supply-focused, “business friendly” narrative with a strong, unacknowledged, Puritan moralism providing the emotional foundations.
But markets are a balance. Lost in all this is how critical demand is to balance the equation. We spill gallons of ink on the supply side. We assume the demand side is some passive, un-knowable outcome.
We are clearly in a major demand-deficit crisis. But most commentary and debate lacks even the words and ideas to understand that. We do actually have a perfectly useful toolkit of words and terms, but the whole lot is smeared with the sneering libel of “Socialism.” So we stand around in dull, mute agony – lacking even the words to describe our affliction. This is what makes posts like this one so important.
From “The Money Illusion” by Scott Sumner http://www.themoneyillusion.com/
“How to Prevent an Epidemic of Reckless Lending”
“Could there be some sort of common external shock that economic theory predicts would cause Reckless Lending in a large group of countries? Yes, the biggest fall in NGDP since the Great Depression…. Just to be clear, when I say tight money causes “Reckless Lending,” I mean tight money causes NGDP to fall, which causes defaults, which causes loans that were not reckless at the time to later be perceived as reckless.”