The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: bentway who wrote (202722)	5/17/2009 12:38:02 AM
From: neolib	Read Replies (2) of 306849

Yeah, well come what may, this period is going to be seen as the defining test of Keynesian theory. I don't think it is an overly fair test. As a metaphor, the elevator control on an airplane is clearly the primary input for pitch control. Suppose the pilot has been pulling back on the yoke, and the plane has climbed to near its service ceiling with the engine running at full throttle, and the plane is about to stall. At that point, pulling back on the yoke ain't going to keep the nose up. But only a person ignorant of airplanes would try to infer from this that the elevator does not effect pitch. Unfortunately, in economics such ignorant inferences are made all the time, generally along one ideological line or the other. What Keynes pointed out is that economies can be manipulated to smooth out higher frequency wiggles. He was absolutely correct in that observation. It is a mistake to think that such manipulation can result in continual higher growth. The problem for Obama is that the economy is having a major stall from rather above the service ceiling. Keynes can't help much in that context, all IMHO.

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