Re: Article from The Guardian newspaper

[Paul Davidson <pdavidson@xxxxxxx>]

At 08:54 PM 9/6/2002 -0400, you wrote:

> The Dow is now some 25-30% above
> Greenspan's "irrational-exuberance" level -
> when a "rational" monetary policy response would have been to
> "calm the
> nerves of financial market participants" by taking away the punch
> bowl.
>
> It strikes me as self-evident that Keynes, as life-long opponent of
> monetary
> inflation, would NOT agree that the cure for the hangover is to
> "flood the
> system" with more of what made it sick in the first
> place.


The solution for a boom is not a higher rate of interest but a lower rate
of interest [See Keynes, GT]

Flooding the market with liquidity after September 11, did not cause any
inflation.  You have to get off the quantity theory of money kick
.

Paul

Paul Davidson

Editor, Journal of Post Keynesian Economics

503 SMC

University of Tennessee

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