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Yes, but I still haven't claimed that you automatically return to the trend! I said that even if you believe in that idea, there will be lost output if you don't act contracyclically. And returning to a full employment equilibrium in the long run by doing nothing (through wage deflation and without stimulus), does not necessarilly mean you catch up to the trend. You might fall behind the trend permanently, but still reach an equilibrium, just one where GDP is lower, lagging timewise, compared to if you had intervened in the short term.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Nov 3rd, 2011 at 05:19:50 PM EST
[ Parent ]
That is the assumption of the mainstream theory, that the original growth trajectory is still there to return to.

If you don't buy that assumption ~ good.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Nov 4th, 2011 at 01:16:17 PM EST
[ Parent ]
Seems the chairman of the Bank of Sweden, Stefan Ingves, doesn't belive that. And he's not even the most Keynesian guy on the board, that would be Lars E. O. Svensson.
   
   
   
Vi vet att finansiella kriser har permanenta effekter på tillväxten. Det stora BNP- tapp som blir följden av en djup finansiell kris går oftast inte att ta igen under perioden efter krisen. Normalt får vi ett skift nedåt i BNP-nivåtrend även om goda tider sedan kan innebära en återgång till samma takt för tillväxten.We know financial crises have permanent effects on growth. The large fall in GDP which results from a deep financial crisis is not usually possible to regain in the period after the crisis. Normally we get a downward shift in the GDP-level trend even if good times later can result in a return to the old pace of growth.


Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Nov 11th, 2011 at 07:30:33 AM EST
[ Parent ]
The quote is from today, as is this graph. I suppose translation is superfluous.



Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Nov 11th, 2011 at 07:37:12 AM EST
[ Parent ]

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