Lars P. Syll — Austerity is no liquidity trap solution

Mainstream neoclassical economists seem to think that there really isn’t any difference between solving a liquidity trap by lowering real wages via inflation or by lowering nominal wages.

But that is of course pure nonsense. Lowering real wages via inflation and lowering nominal wages aren’t equivalent measures.

As John Maynard Keynes wrote in General Theory (1936):

Lars P. Syll's Blog
Austerity is no liquidity trap solution
Lars P. Syll | Professor of Social Studies and Associate Professor of Economics, Malmo University