Keynes Prescription

Economist Bruce Bartlett has a fine article in Forbes that examines the policy errors during the Depression and draws some conclusions about what needs to be done this time. The beauty of the piece is that Bartlett takes a complex subject and masterfully writes about it in easy to understand terms.

Every day that goes by makes clearer the parallels between the current financial crisis and the one that led to the Great Depression. Then, as now, the core problem was one of deflation, or falling prices. But fixing it will require more than just low interest rates. This was the key insight of British economist John Maynard Keynes, whose theories finally explained how to end the Great Depression. They may be the key to solving today’s crisis as well.

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