Samuelson on the bankruptcy of modern economics

Bob Samuelson argues that policy-makers are groping in the dark from hour to hour because modern macroeconomics doesn’t have sufficient tools for us to deal with the kinds of financial instability we are witnessing at the moment.

“What we are witnessing, in the broadest sense, is the bankruptcy of modern economics. Its conceit has been that we had solved the problem of stability. Oh, there would be periodic recessions, but the prospects of a major economic collapse were negligible because we knew how the system worked and could take steps to prevent it. What’s been so unsettling about the present crisis is that it has not conformed to the standard model of business cycles and has not submitted to familiar textbook solutions.”

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I liked Nigel cassidy’s video report on credit default swaps .... made it all very clear to me and my students. And John Moulton makes an appearance, an experienced industrialist and managing director of Alchemy who has an instinctive understanding of how financial irrationality and excess can hurt the real economy.