The current macro-economic crisis can be diagnosed as repressed stagflation bursting into the open. The Obama Administration and EU stimulus packages prevent economic collapse but do not tackle stagflation itself yet. Without proper measures, a protracted period of high unemployment or high inflation and continued instability can be expected. Instead, macro-economic theory can come at ease with deflation as a temporary state that is logically implied by the notion of price stability. What is crucial is to keep people in jobs. With proper tax measures the NAIRU is shifted to the proper position. The current situation seems to require a (temporary) reduction of the working week, for some areas even from 5 to 4 days.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
14180.
Find related papers by JEL classification: E0 - Macroeconomics and Monetary Economics - - General A1 - General Economics and Teaching - - General Economics P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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