Cullen Roche over at Pragcap spells it out very succinctly: the neoclassical garbage being taught in econ departments at Universities around the country, like Harvard, is totally flawed and inapplicable to the current reality.
|"All I can say is bravo. Unfortunately, I have bad news for you Harvard students – the entire neoclassical foundation upon which Dr. Mankiw is basing his work is flawed. Yes, he is teaching you out of textbooks that are based on a convertible currency system. This is largely inapplicable to the system in which we currently reside where the USA is the monopoly supplier of dollars in a non-convertible (into any metallic money) floating exchange rate system. Some might be inclined to say this is nonsense. But I assure you it is not. You know Chapter 25 of your textbook in section 9 on the loanable funds market? It doesn’t exist. You know the section in the same chapter on where he explains how the US government borrows to “finance” itself? A total myth. You know the part where he explains how the government borrows money thus “crowding out” the private sector? That doesn’t actually happen. You know the section in Part Ten, Chapter 27 on the money multiplier? Yep, that’s a myth also."|