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Economist: Why The Bailout Money Should Have Gone To Real People, Not Banks

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Author Topic: Economist: Why The Bailout Money Should Have Gone To Real People, Not Banks  (Read 323 times)
Major Weatherly
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« on: September 20, 2009, 05:21:12 pm »

    So giving the stimulus to the debtors is a more potent way of reducing the impact of a credit crunch—the opposite of the advice given to Obama by his neoclassical advisers…
    Obama has been sold a pup [i.e. tricked into buying something that is not worth anything] by neoclassical economics: not only did neoclassical theory help cause the crisis, by championing the growth of private debt and the asset bubbles it financed; it also is undermining efforts to reduce the severity of the crisis.

    This is unfortunately the good news: the bad news is that this model only considers an economy undergoing a “credit crunch”, and not also one suffering from a serious debt overhang that only a direct reduction in debt can tackle. That is our actual problem, and while a stimulus will work for a while, the drag from debt-deleveraging is still present. The economy will therefore lapse back into recession soon after the stimulus is removed.

http://www.nakedcapitalism.com/2009/09/guest-post-steve-keen-out-thinks-larry-summers.html
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