Akvod on 23 June 2010
| ithis said: Quicq questions: How come the economy is in this bad shape although everyone was spending like crazy for like a gazilion years before the crisys, and nobody saved nothing? How will trying to spend more now that there is less will help when spending all of it when there was lots lead to now? |
Because the Bush adminstration created an inflationary gap by overkilling the 2001 recession. Keyensians recommened a CONTRACTIONARY mindset, during an economic growth, which includes higher taxes and interest rates.
For your third line, as Krugman said, you spend now, and you save later. We didn't save after the 2001 recession ended, causing an inflationary gap.
