BERKELEY – In the United States, we sit in the midst of 10% unemployment. In some countries, fiscal policy is crippled by legitimate fears that more deficit spending will trigger government-debt crises. In many other countries, fiscal policy is crippled by confusion between short-term cyclical and long-term structural deficits.
Meanwhile, banking policy is crippled by populist reaction against more bailouts, and monetary policy by a strange mindset among central bankers that fears inflation even as wage growth continues to drop. As R.G. Hawtrey said of such people’s predecessors in the Great Depression, they are “crying ‘Fire! Fire!’ in Noah’s flood.”