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> More construction in an over-supplied housing market? You do realize that Keynes' departure from 'classical' economics was a model that depended more on aggr

by Mikeb85 11y ago

> More construction in an over-supplied housing market? You do realize that Keynes' departure from 'classical' economics was a model that depended more on aggregate demand than supply, right? Classical economics (ie. pre-Keynesian economics) would say "just build more". Keynesian economics states that you should stimulate demand (lower interest rates, increase government spending, increase money supply, etc...). Which is exactly what got us out of the recession. > It blows my mind that Keynesians can't identify busts that were caused by bubbles. It's not about whether they can or can't. Some obviously did see the bubble coming (some Goldman Sachs traders famously bet against the housing market). The problem is that too many people profit from the 'bubble', and momentum takes people over the edge (because, like it or not, consumers are NOT rational).

skylan_q 11y ago
>Which is exactly what got us out of the recession. It's what caused it in the first place. i.e. 2% interest ninja loans, CRA, "home ownership society", gov't-sponsored entities, etc...
- Mikeb85 11y ago
  Yes and no. It was caused by too much exposure to debt, so when asset prices dropped banks and consumers became insolvent. Low interest rates by themselves wouldn't have caused the recession, although rates probably should have been higher during that time period anyway. Also keep in mind it's only recently that Keynesian and left-wing economics has become fashionable once again...
irishcoffee 11y ago
> Which is exactly what got us out of the recession. wat. We're not out of it, people are just adapting to it.
- Mikeb85 11y ago
  Yes because a recession looks like 3% growth...
  - irishcoffee 11y ago
    And yet the government is _terrified_ of raising the interest rate. Terrified. Think about it.
    - Mikeb85 11y ago
      Yeah because there's negative interest rates in Europe and the USD has already appreciated considerably. Anyhow, low-ish interest rates were the norm for most of the US' history, rates will go up, but get used to low rates. Keeping the banks in line (not taking too much leverage) is the key to preventing another bust, not raising interest rates. Regardless, low interest rates don't mean the US is still in a recession. There's 5% unemployment and the economy is growing. Heck, 2 of Europe's stronger economies (Switzerland and Sweden) have negative rates.

by Mikeb85 11y ago

skylan_q 11y ago

>Which is exactly what got us out of the recession. It's what caused it in the first place. i.e. 2% interest ninja loans, CRA, "home ownership society", gov't-sponsored entities, etc...

Mikeb85 11y ago
Yes and no. It was caused by too much exposure to debt, so when asset prices dropped banks and consumers became insolvent. Low interest rates by themselves wouldn't have caused the recession, although rates probably should have been higher during that time period anyway. Also keep in mind it's only recently that Keynesian and left-wing economics has become fashionable once again...

irishcoffee 11y ago

> Which is exactly what got us out of the recession. wat. We're not out of it, people are just adapting to it.

Mikeb85 11y ago
Yes because a recession looks like 3% growth...
- irishcoffee 11y ago
  And yet the government is _terrified_ of raising the interest rate. Terrified. Think about it.
  - Mikeb85 11y ago
    Yeah because there's negative interest rates in Europe and the USD has already appreciated considerably. Anyhow, low-ish interest rates were the norm for most of the US' history, rates will go up, but get used to low rates. Keeping the banks in line (not taking too much leverage) is the key to preventing another bust, not raising interest rates. Regardless, low interest rates don't mean the US is still in a recession. There's 5% unemployment and the economy is growing. Heck, 2 of Europe's stronger economies (Switzerland and Sweden) have negative rates.