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With "the market" here, I'm refering to the labour market. If you let the deregulated financial markets keep imposing shocks on the labour market, you'll likely to be in a constant state of flux and uncertainty, which is not good for investment.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Nov 3rd, 2011 at 09:16:18 AM EST
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In other words, if you enforce clearing in the money and product markets, you get clearing in the labour market.

Yes, that's Walras' Postulate. It also works the other way around: If you enforce clearing in the labour and goods market through a determined full-employment policy, then you make financial market clearing easier (because then all you have to do is prevent large discontinuities, and Walras' Postulate will take care of the rest).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 3rd, 2011 at 12:05:38 PM EST
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I rather meant that if you keep whacking the economy with constant shocks and (more or less political) crises, there will be no business confidence. And if you refuse to contracyclically stimulate the economy in the short term, and instead want the market forces to resolve the problem via wage deflation, you need the good graces of the confidence fairy. And the fairy hates instability and unpredictability.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Nov 3rd, 2011 at 05:25:59 PM EST
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