Thursday, November 6, 2014

"prior to onset of financial crisis"

Lawrence Summers:

Here it is instructive to consider the performance of the US and Eurozone economies prior to onset of financial crisis in 2007.

If you want to know about the crisis, don't spend all your time looking at the crisis. Spend most of your time looking at the sixty years before the crisis.

If you want to know about the crisis, you have to take all the analysis of the past five decades at least and flush it down the toilet. You have to go back, for example, to the analysis that says the mid-1960s inflation was a "guns and butter" problem, throw it away, and be willing to consider a different explanation.

And everything since.

The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.

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