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Resolving the US financial crisis: politics dominates economics in the New Political Economy

Author

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  • Jan Kregel

    () (Levy Economics Institute of Bard College)

Abstract

Most economists expected that the "Great Recession" produced by the financial meltdown of 2008 would usher in a resurgence of traditional Keynesian economics and a decline of what has come to be called "market fundamentalism". By contrast, also due to the inadequate size of the 2009 stimulus package, the resurgence of support for Keynesian expenditure policies has been extremely short lived. However, the negative popular and political reaction should not have come as a surprise, at least for three reasons: the design of the Obama stimulus plan and its difference from the expenditure policies of the Roosevelt Administration; the political environment that has eviscerated fiscal policy and placed monetary policy at the centre of economic policy and produced "debt driven" growth; the difference between policies appropriate to treating an income deflation and a debt deflation.

Suggested Citation

  • Jan Kregel, 2011. "Resolving the US financial crisis: politics dominates economics in the New Political Economy," PSL Quarterly Review, Economia civile, vol. 64(256), pages 23-37.
  • Handle: RePEc:psl:pslqrr:2011:13
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    Cited by:

    1. Raquib Zaman, 2014. "Financial market operations in the United States: ethical issues and lessons for Islamic banking," Chapters,in: Risk and Regulation of Islamic Banking, chapter 12, pages 206-224 Edward Elgar Publishing.

    More about this item

    Keywords

    political economy; financial crisis; Keynesian policies; USA;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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