The Present State of Keynesian Macroeconomics

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For years, the macroeconomists told us the current depression wasn’t even possible. If there are shocks, they told us, we’ll fix it by managing the economy. Monetary policy in the hands of geniuses like Ben Bernanke, we’re told, is supposed to make lame beggars walk and blind men see.

Now the economists are finally throwing their hands up and saying “there’s nothing more we can do.” After years of a pathetic “recovery” with labor force participation at historic lows, and with inflation becoming a real problem that any honest person can see, we’re told that this is the best that can be done. It’s just an inscrutable mystery as to why the economy isn’t doing better. “We don’t know.” “It’s the new normal.” “It’s either this or a global depression.” And so on. I guess I missed the part in which we weren’t in a global depression, and in one that’s about to get a lot worse.

We could also note that all these declarations that nothing can be done are always followed by declarations that “the gold standard is stupid” and “only a jerk would want to get rid of the Fed.” Etc.

11:45 pm on June 4, 2012