The Global Crisis and the Remedial Actions: A Nonmainstream Perspective
AbstractThe global financial crisis has now spread across multiple countries and sectors, affecting both financial and real spheres in the advanced as well as the developing economies. This has been caused by policies based on "rational expectation" models that advocate deregulated finance, with facilities for easy credit and derivatives, along with globalized exposures for financial institutions. The financial crisis has combined with long-term structural changes in the real economy that trend toward underconsumption, generating contractionary effects therein and contributing to further instabilities in the financial sector. The responses so far from US monetary authorities have not been effective, especially in dealing with issues of unemployment and low real growth in the United States, or in other countries. Nor have these been of much use in the context of the lost monetary and fiscal autonomy in both developing countries and the eurozone, especially with the debt-related distress in the latter. Solutions to the current maladies in the global economy include strict control of financial speculation and the institution of an "employer of last resort" policy, both at the initiative of the state.
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Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_677.
Date of creation: Jul 2011
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Global Crisis; Expectations; Underconsumption; Ponzi; Labor Flexibility;
Find related papers by JEL classification:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-27 (All new papers)
- NEP-CBA-2011-07-27 (Central Banking)
- NEP-MAC-2011-07-27 (Macroeconomics)
- NEP-PKE-2011-07-27 (Post Keynesian Economics)
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