Archive for the Category Movies


Invasion of the New Keynesian Mind Snatchers

Wars make people think and do stupid things.  So does deflation caused by tight money.  The intellectual low point of 20th century macro occurred in 1938, when a promising recovery in 1936 turned into renewed depression and deflation.  Interest rates fell to zero, feeding the view that money was irrelevant.  A 1938 EJ article by Joan Robinson provides a good example of the zeitgeist.  Here she criticizes Bresciani-Turroni’s argument that the German hyperinflation was caused by their government printing too much money:

“An increase in the quantity of money no doubt has a tendency to raise prices, for it leads to a reduction in the rate of interest, which stimulates investment and discourages saving, and so leads to an increase in activity.  But there is no evidence whatever that events in Germany followed this sequence.”

So easy money couldn’t possibly have caused the German hyperinflation because German interest rates were not very low.  And everyone knows that easy money is associated with low interest rates.  I won’t insult the intelligence of my readers by explaining what is wrong with her reasoning.

Den ganzen Beitrag lesen…