It is indeed a mixed-up, muddled-up, shook-up world. Right now, the two most prominent institutions calling for an end to the disastrous turn to short-run austerity are … Goldman Sachs and the International Monetary Fund.
Brad has written about the Goldman memo, which calls for a nominal GDP target — that is, a future dollar value of GDP — that would in effect both promise a significantly higher inflation rate over the medium term and require very large quantitative easing. We need to be careful about this: it’s a proposal from the excellent Jan Hatzius, not official GS policy. But still.
Meanwhile, the IMF special report for the G20 (pdf) is essentially a declaration that the focus on universal austerity was wrong, wrong, wrong. It’s a lot milder than it should be — the Fund is still, for example, endorsing the Cameron austerity plan. But it pretty much flatly says that Congress should pass the Obama jobs bill.
What’s going on, I believe, is that serious economists — Hatzius at Goldman, and Olivier Blanchard — are rightly frightened by the economic outlook. And those organizations that listen to the right people are trying to get the message out.
Unfortunately, it may take a long time before policy actually turns around.
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