Archive for April 2009

 
 

“Certain dates in 1932”

There are endless interpretations of what Keynes “really meant” in the General Theory.  In my view there is no answer to this question; Keynes’ thinking was too muddled and contradictory to be understandable in terms of modern monetary theory.  But now that some of our leading macroeconomists are showing equally muddled and contradictory thinking, it might be time to revisit this famous book.  In my view page 207 holds the key to the entire book—indeed two keys.  It explains why the book is so misunderstood by modern readers, and then just a few lines later, how Keynes misunderstood his own argument.


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Evidence of Reverse Causality?

In the comment section of an earlier post here, there has been some interesting discussion of real estate prices, so I thought a new post would be in order.  Last October when I first began arguing the reverse causality view (tight money–>>expectations for falling NGDP–>>falling asset prices–>>worsening financial crisis) I actually didn’t have much evidence.  I viewed the fall in NGDP as a Fed error of omission, and I saw circumstantial evidence that the debt crisis was spreading out of the subprimes and Alt-As into other sectors.  But it was mostly just common sense—I figured that rapidly falling NGDP could not be good for debtors, and banks were in a very fragile state even before NGDP began falling.


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