Robert Shiller pulls no punches in his Bloomberg piece; we need more stimulus spending and we may not get it.
In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again. We appear to be in a much better situation due to the stronger efforts to date. Still, there is a danger that, because of a combination of faulty economic theory and inadequate appreciation of human psychology, as well as deep public anger, we will not continue with such stimulus on a high enough level. ...
Confidence is Key
Our theory of animal spirits is centered on confidence, and the vicious downward cycle of loss of confidence leading to decline in economic activity and then to more loss of confidence.
The next time you hear McCain, Ryan or Feingold bitch about earmarks or Michael Steele cry about spending, think: Depression.
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