...what about the practice?
‘The onset of far greater flexibility in recent years in the labour and product markets… raises the possibility of the resurrection of confidence in the automatic rebalancing ability of markets, so prevalent in the period before Keynes… In its modern incarnation, the reliance on markets acknowledges limited roles for both countercyclical macroeconomic policies and market-sensitive regulatory frameworks. The central burden of adjustment, however, is left to economic agents operating freely and in their own self-interest in dynamic and interrelated markets. The benefits of having moved in this direction over the past couple of decades are increasingly apparent...’ Alan Greenspan, London, January 26th
PHEW!! And there WE were labouring under the misapprehension that slashing nominal interest rates to 1% while promising a whole host of ‘quantitative easing’ measures and hinting at operations to try more directly to pervert the market pricing of longer-maturity financial assets, running up a $1/2 trillion budget deficit - predicated upon a 40% increase in defence spending – tacitly promoting a 25% fall in the Dollar to a nine-year, trade-weighted low, and encouraging the public to take on a whopping 35%, $2.4 trillion, $22,000 per household extra in personal debt might have qualified as a little, old-fashioned, Keynesian ‘countercylical policy’!!!!!
