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2016-04-18

The underlying problem – which has plagued the global economy since the crisis, but has worsened slightly – is lack of global aggregate, demand., Stiglitz

Clearly, the idea that large corporations precisely calculate the interest rate at which they are willing to undertake investment – and that they would be willing to undertake a large number of projects if only interest rates were lowered by another 25 basis points – is absurd.

It should have been apparent that most central banks’ pre-crisis models – both the formal models and the mental models that guide policymakers’ thinking – were badly wrong. 

None predicted the crisis; and in very few of these economies has a semblance of full employment been restored. 

The ECB famously raised interest rates twice in 2011, just as the euro crisis was worsening and unemployment was increasing to double-digit levels, bringing deflation ever closer.

Joseph E. Stiglitz, Project Syndicate 13 April 2016

Stiglitz at IntCom



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