Financial crises — no big deal

23 May, 2017 at 17:51 | Posted in Economics | 1 Comment

dumstrutMany say or think that there were problems in the financial system that gave rise to the Great Depression. We’ve looked at that in a systematic way using modern theory. And we found that businesses had all kinds of money to invest, and they didn’t. They increased distributions to owners. Why? The answer is that businesses did not perceive they had profitable investment opportunities.

I don’t think financial crises are a big deal.

Edward Prescott

And this blah blah blah guy got a “Nobel prize” …

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1 Comment

  1. Any narrative arguments must be back up by data. All recessions are shown up in downward spirals in any of price level ratios:
    (a) Real Households Net worth/P,
    (b)(Real Households Financial Assets – Liabilities)/P
    (c) Real GDP/P

    https://fred.stlouisfed.org/graph/fredgraph.png?g=dPTi


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