Some of my readers have asked me if there really is any difference between solving the liquidity trap by lowering real wages via inflation or by lowering nominal wages. Are they not equivalent measures?
No, they are not!Lars P. syll's Blog
Debt-deflation and austerity
Lars P. Syll | Professor, Malmo University
2 comments:
Of course, the only reason British wages were too high in the 1930s was because of the price distortions caused by going off gold and WWI and then foolishly trying to go back on gold at the old par. Keynes' ad hoc "cure" was to artificially lower wages without the victims knowing what hit them. But they quickly figured out the scam and insisted upon C.O.L.A.
http://www.youtube.com/watch?v=gaQcbGoW2C0&feature=plcp
Why bring Old Parr into this?
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