Lessons from the Great Depression

Posted by Mark Motive on July 26, 2010 Economics, Markets Add comments

Jul 262010

James Montier of GMO releases his latest missive (Is Austerity the Road to Ruin?). In it he quotes Christina Romer:

In early 2009, Christina Romer, Chair of the Council of Economic Advisers, gave a speech laying out six lessons from the Great Depression.

Lesson I: Small fiscal expansion has only small effects.

Lesson II: Monetary expansion can help to heal an economy even when interest rates are near zero.

Lesson III: Beware of cutting back on stimulus too soon.

Lesson IV: Financial recovery and real recovery go together.

Lesson V: Worldwide expansionary policy shares the burdens and the benefits of recovery.
Lesson VI: The Great Depression did eventually end.