Bill Mitchell — Look after the unemployment, and the budget will look after itself

Great post by Bill today that is worth calling attention to here in light of the present controversy over employment.

There was a Wall Street Journal article (March 5, 2012) – The High Cost of the Fed’s Cheap Money – which is full of statements like “could eventually lead to an economic calamity” etc. The WSJ article basically rehearses a confused form the old supply-side tradition of the pre-Great Depression era where the claim was that “supply creates its own demand” (so-called Say’s Law) which was shorthand for the proposition that flexible prices and interest rates would ensure that whatever was supplied would be purchased. The same sort of arguments were used in a recent lecture to Harvard EC10 students by the Director of the US Congressional Budget Office. It is extraordinary that these myths, which were part of the body of economic theory that led the world into the current crisis, still have currency. They should start by understanding what Keynes meant when he said “Look after the unemployment, and the budget will look after itself”.

Read it at billy blog
Look after the unemployment, and the budget will look after itself

by Bill Mitchell