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Grasping Reality with Both Hands
Brad DeLong (March 2009): Kick-Starting Employment : Unemployment is currently rising like a rocket, because businesses that normally would be expanding and hiring are not, and those businesses that would normally be contracting and shedding workers are doing so very rapidly. Businesses that ought to be expanding and hiring cannot, because the depressed general level of financial asset prices prevents them from borrowing money or selling bonds on profitable terms. In response, central banks should purchase government bonds for cash in as large a quantity as needed to push their prices up as high as possible. Expensive government bonds will shift demand to mortgage or corporate bonds, pushing up their prices.
Federal Reserve Chairman Ben Bernanke is speaking today on the state of the economy. We know what he'll say. The economic recovery is proceeding, but slowly. The unemployment picture is improving, but slowly. The question is whether all this slowness will lead not only to a slowdown, but to a turnaround. Are we heading to a double-dip recession , as Robert Reich and other economic commentators have suggested?
Are We Slipping Back Into a Recession? - Business