Conventional Statements?!


I may be in shock…

Krugman references the Great Depression, using the standard tools macroeconomics! No liquidity trap reverse-double-backflips. No quantum uncertainty. Just textbook monetary theory:

Actually, as Hugh points out, Latvia is still a long way from having brought prices and wages down to a competitive level. So it’s still faced with the prospect of years of grinding deflation and sky-high unemployment. But it’s a success!

By the same token, France in the mid-1930s — which stayed on the gold standard while other nations devalued, and whose recovery lagged far behind less doctrinaire economies — was also a success story.

I had always thought that in a “liquidity trap”, lead turned into gold and thus devalued gold against goods and services, increasing the price level.

On a more serious note, it is always good to have Krugman saying things that makes sense!

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One thought on “Conventional Statements?!

  1. “No liquidity trap reverse-double-backflips. No quantum uncertainty.” I think I might enjoy Economics on Ice, where it becomes a true art form.

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