http://thisishell.net

Smokin’ Joe Stiglitz has a short review in the London Review of Books of Robert Skidelsky’s recent book on Keynes and the Great Recession, but it masks a longer think piece on the sources of the crisis and the proper response.  After a little horn-tooting, Stiglitz makes a good point: the current recession is not entirely due to financial hijinks.  Instead, financial expansion is a corollary to underinvestment in the ‘real’ economy, which eventually leads to a crisis in aggregate demand.

The linking of financialization and underinvestment is actually quite a radical position to take, though Stiglitz pretends otherwise.  After all, financial innovation is supposed to be always good, right?  In reality, periods of financial expansion (I’m looking at you, roaring 1920s) throughout the history of capitalism have seen shifts of investment away from production and into finance, leading to temporary inflations of “good times” and the belief that “this time is different.”  It’s like Chuck’s winter glögg party every year – I always tell myself I’m going to responsibly consume blindness-inducing liquor into the early hours of the morning without repercussion.  Who knew?