James K. Galbraith On The Recovery To Come @ Hyman Minsky Conference
I really enjoy reading the words of James K Galbraith and it’s even more interesting to hear them at the Minsky Conference. Galbraith talks about a book called Plunder and Blunder which I think you should read.
Click Here To Read James K. Galbraith Words At The Minsky Conference
Article/Speech Introduction (Via New American Contract)
The economist Dean Baker has a small book entitled Plunder and Blunder, in which he explains how he saw the housing bubble when others did not. The story is quite simple: Dean plotted price/rental ratios, and when these departed sharply from trend he assumed they would return. What went up, had to come down.
The question before us is: does the same analytical principle apply to the slump? Will what went down, come back up? Does the fact that there was No New Paradigm imply that there must also be No New Depression?
Additional Excerpts (Via New American Contract)
The fact that recessions are self-limiting through the inventory cycle. In the slump, production always falls much more than consumption, so that inventories are liquidated, and as this process is completed, production must be restarted. To this, we can add the fact that sharply falling commodity prices have helped restore real purchasing power.
- The fact that services are more stable than either manufacturing or agriculture and that they are a much larger part of the total economy than they were eight decades back.
- Even more important, the fact that rock-stable government is much larger, in proportion to the economy, than in 1929. To this we can add that falling income taxes and rising unemployment insurance provide massively for automatic stabilization as unemployment rises. It’s ugly but it works.
- Finally, the fact that the fiscal expansion package (including the recent increase in social security benefits) is the largest on the post-war record, and also the longest-lasting, with expenditures expected to surge for two years rather than the norm of one.
