Deflation: The Failed Macroeconomic Paradigm Plumbs New Depths of Self-Parody

New Economic Perspectives has the William Black article Deflation: The Failed Macroeconomic Paradigm Plumbs New Depths of Self-Parody.

As crazed and destructive as the quacksterians are, the “wait for it” deflationauts bring a degree of nuttiness to the economic ER that causes one to be stunned and horrified.  For the deflationaut economists to figure out (finally!) that deflation is deadly they have to understand something about inadequate demand.  The WSJ article shows that their rationale for warning (but not acting!) against “the threat of deflation” is based on the effect of deflation on demand.

“[D]eflation can be difficult to escape because households and firms postpone purchases in the hope that goods and services will be cheaper in the future, thereby further weakening demand and pushing prices down.”

Note that this passage implicitly admits that “weak demand” “push[es] prices down.” Inadequate demand, therefore, is what causes deflation.

Don’t you wish William Black wouldn’t mince words, but would tell you what he really thinks about the quacksterians? 🙂

It is amazing how people can claim that Keynesian economics is complete bullshit while using Keynesian economic principles to explain what is going on in the economy. Makes one wonder how their minds work, if they work at all.

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