A Very Stimulating Crisis

Wednesday, January 30th, 2008

We face A Very Stimulating Crisis, and economists are no longer so sure they know what to do:

Does the U.S. economy in early 2008 need a stimulus? If so, will tax cuts or attempts by the Fed to lower interest rates do the trick?

I used to be able to answer such questions with confidence. Now I cannot.

The theory of the causes of unemployment, interest rates, and inflation falls under the subject known as macroeconomics. Macroeconomics is like astrology or Freudian psychology, in that a lot of people used to believe it, and a lot of people still do, but many with a scientific bent tend to stay away from it.

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