Tuesday, September 14, 2010

The Last Thing Government Will Do

Economist Steve Keen says that the major economies are entering a debt deflationary spiral. The way out of it would be to increase workers' wages which would allow them to pay off their debts and create inflation. But, economic policy makers don't understand this, and therefore, it will be the last thing they do.



The entire show is called Global Debt Collapse

Dean Baker points out that economists are always quick to blame workers for the economy being depressed rather than the bad judgments of the economic policy makers themselves.

Before examining the argument here more closely, it is worth noting that arguments about rising structural unemployment come around during every recession. When the economy fails to produce jobs fast enough to bring down the unemployment rate economists quickly turn to blaming the workers. The problem is not that economists came up with bad policies; the problem is that workers don't have the right skills or live in the right place. This happened after each of the last four recessions.

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