Raghuram Rajan tries to explain that “Sensible Keynesians see no easy way out.” Who is his audience? The Keynesians? If so, why would an anti-Keynesian tell Keynesians what they think? And if so, shouldn’t he present a poll of Keynesians or something???
If he expects to address the anti-Keynesians, how can he claim to sum up Keynesian thought? Again, maybe some evidence is in order…??? Just a thought… (Is this the level of intellectual rigor he employs on academic papers?)
Yeah… So… This is another embarrassing entry into the depression debate by Dr. Rajan… Here’s some gems:
“…greater demand in New York is not going to help families eat out in Las Vegas.” No, but greater demand in Las Vegas will help families eat out in Las Vegas… !!
“Targeted household debt write-offs in Las Vegas could be a better use of stimulus dollars.” Why Las Vegas? Is Rajan actually proposing targeted write-offs to all underwater homeowners in all areas where housing prices were most inflated? Why? Why, when the current depressed economy has dragged down incomes and employment even where housing prices were not inflated? (I live in north Dallas. Home values in my neighborhood have been mostly steady, but [just as a for-instance] my wife has been unable to find any good, steady work for two years.)
“Policy should instead help workers move where there are suitable jobs.” LOL… And where does Rajan suppose that is? Mexico? China??? In America – more so than almost any other country – workers are willing and able to move for work. If there were some pocket of very low unemployment, Americans would be moving there. The fact that you don’t see this happening ought to be self-evident proof no such places exist. It’s called a DEPRESSION for a reason, and that’s why Rajan’s distinction between what we have now – as opposed to complete breakdown of civil society (“… a fully fledged panic where demand collapses, banks and companies fail and organisational capital is destroyed.” – you can’t make this stuff up!) is also foolish.
“Moreover, it is not clear that a worker used to putting up drywall can move easily to laying fibre-optic cable.” – Not clear? I wonder if we could make it more clear for Mr. Rajan? Of course, he’s not trying to state the clarity of real facts here – he’s just using language to build up a series of fallacious obstacles. I mean, we’ve all seen that ‘ditch-digging 101’ course in our local university course listings (oops, that would mean student loans – and more debt!). Has Rajan ever heard of ‘on-the-job training’? You don’t need 20 physicists to lay fiber-optic cable – you mostly need low- and unskilled labor, and one or two engineers (intermittently)… But why would any companies lay fiber-optic cable when most people can’t currently afford to pay for such services, anyway!?!?!?
“In the US, demand is weakest in communities where a boom and bust in house prices has left an overhang of household debt. ” – Yes, but it doesn’t matter where it’s “weakest” (relative to the mean or average) – what matters is, what proportion of the US population lives in a relatively depressed local economy? Answer – 95%? 99%? It mostly only depends on how big you allow your circles to be. This is probably where Rajan has gone wrong. This depression isn’t merely affecting a few pockets of workers here and there. It’s affecting almost everyone in the economy whether via depressed stock portfolios, underwater mortgages, or inability to find the full employment each household anticipated five years ago…
It’s really sad that this guy teaches economics…