There has been a great deal of commentary in the media about economics this semester, with good cause… I’ve brought together a few pieces from currently popular economics writers and thinkers to bring some context to the Keynesian economic theory that we’re currently discussing in class. Much of our course has revolved around how monetary policy is enacted and when it is effective, but it appears as though there is not much more room for the Fed to take effective corrective actions to stabilize the current economy. It appears as though Congress and the next President are ready to take more steps to stimulate the economy through additional fiscal action.
I would like everyone to read the articles and blogs below, and take note the variety of opinions these writers have on the economy. Given your basic economic understanding of the current recession, what action do you believe is warranted going forward? If you think fiscal action is warranted, what do you believe will be the result, and what will be the long-run consequences for YOU and others. Again, try to back up your opinions with facts (or at least estimated facts).
You can alternatively consider the articles that discuss the definition of a recession, since it was finally declared on 12/1. Many questions can be raised about the need and timing of an “official” start date to a recession. Think about whether or not you believe an “official” date is necessary, and if you think there would be any difference if the NBER did not call these precise dates. For some evidence that the dates do in fact matter, you can actually now bet on when you believe a recession has begun through a firm called Intrade. Examining Intrade’s graphs on the probability of a recession in 2008, shows that the economy was looking pretty rosy to many bettors back in September. So, aside from gambling, do you believe that it is necessary to know when exactly it is believed that our economy has gone through a recession.
For each of these, you need to find your own sources (there are many stories out there). You should NOT use some random blogger’s story or Wikipedia to support your opinion. Try to stick to reliable news sources and facts. Remember that for these assignments you need to put forth your opinion and back it up with facts.
What would Keynes have done? by Greg Mankiw
Fed Signals More Action WSJ.com Blog
<img src="http://data.intrade.com/graphing/closingChart.gif?contractId=508654&intradeChart=true&transBackground=true&transBackground=true" height="225" width="460"
alt=”Price for US Economy in Recession (*see contract rules for definition*) at intrade.com”
title=”Price for US Economy in Recession (*see contract rules for definition*) at intrade.com” border=”0″>