Plus ça change…

November 20th, 2011 at 7:58 pm

I was just re-reading this great little monograph from the early 1990s called “Keynes in the 1990s: A Return to Economic Sanity,” by Michael Stewart.  And I stumbled on this quote, reflecting the author’s hopes re lessons learned from the 1990 recession:

Of the…factors singled out as having helped to create the current world recession, one—the excessive expansion of credit in the US, Britain, and Japan—could have been avoided and, if the lesson has been learned, will be avoided in the future.  The other—the effect on German interest rates of reunification—while historically unique in itself, raises some disturbing questions.  How can Britain, or any other European country, create or maintain full employment if this calls for a monetary policy that is inconsistent with the policy of the Bundesbank [the German central bank]?

OK—lesson one re excessive credit—not learned.  Lesson two—remember, this was before the Euro—substitute the European Central Bank for the German Central Bank (always hawkish, but particularly so when West Germany was using expansive fiscal policy to soften the economic disruption of East German reunification)—and you have to check “not learned” there too.

Those who forget history…yada, yada…


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One comment in reply to "Plus ça change…"

  1. Peter K. says:

    If/when you have another blog post where you answer questions I would be interested in hearing your thoughts on credit.

    As a non-economist my view on credit is basically opposite whatever conservatives happen to be arguing. Admittedly I don’t have a firm grasp of the issue.

    So for example conservative economists will argue that their man Greenspan held rates too low for too long in the 2000s. My gut reaction is to believe there is more to the story, for instance Bernanke’s global savings glut and bad regulations and regulators.

    Basically I would like to see full employment whatever amount of credit in the system that requires.