tag:blogger.com,1999:blog-1341105382602182419.post8964563614070684998..comments2023-10-25T08:42:15.125-07:00Comments on Economist/Banker: Shan Saeedhttp://www.blogger.com/profile/02787485287146561831noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-1341105382602182419.post-24482617794238911972012-06-07T06:51:14.301-07:002012-06-07T06:51:14.301-07:00I think one has to look at the deeper macroeconomi...I think one has to look at the deeper macroeconomic issues. One thing you are not looking at is the real interest rate compared to the nominal one. The other thing is the negative impact on economic growth resulting from a higher savings rate. A third point is the absence of any growth generator in the economy besides financial transactions. Housing prices are continuing to fall, commodity prices are falling, and the cost of labor is falling. These factors make inflation a very low risk offering the opportunity to expand government spending without an immediate uptick in inflation. Until demand picks up, the economy will continue to contract or go sideways. Like Krugman, I agree that the government must step in either through a public works program (WPA) or public/private partnerships to increase demand, hence creating jobs. If you shrink government spending when the government is running large deficits, you immediately reduce the total size of the economy. One could theoretically cut defense spending without causing much damage but politically, that option is off the table under Republicans and Democrats. Krugman's analysis, no matter how politically incorrect, reflects proven economics. The neo-classicists have been running the show for the past 12 years and look where we are. It's time for some good old fashioned pump-priming.Ballantine 2012https://www.blogger.com/profile/11851838511016525976noreply@blogger.com