Beat the Clock Economics

From Susan Fein at TPM Café Book Club:

Participants in this discussion share the view that the toughest choices facing policy makers are imposed by the clock: how quickly can government spending flow into the economy thereby propping up demand, and slowing the rate of business collapse, while making the economy cleaner, greener, and fairer too.

And from Paul Krugman:

Right now the world economy is in a nosedive, and understanding what I call “depression economics” — the weird world you get into when even a zero interest rate isn’t low enough, and a messed-up financial system is dragging down the real economy — is essential if we’re going to avoid the worst.

The key thing, when you’re in a situation like this, is realizing that normal rules don’t apply. Ordinarily we’d welcome an increase in private saving; right now we’re living in a world subject to the “paradox of thrift,” in which private virtue is public vice. Normally we want to be careful that public funds are spent wisely; right now the crucial thing is that they be spent fast. (John Maynard Keynes once suggested burying bottles of cash in coal mines and letting the private sector dig them up — not as a real proposal, but as a way of emphasizing the priority of supporting demand.)

The big test for the next few months will be whether policymakers here and abroad can wrap their minds around this Alice-in-Wonderland world. If they can’t, nobody knows how deep the rabbit hole goes.

If the clock is what’s important, Stephen Harper’s and Jim Flaherty’s actions of the last month have certainly beat Canadians.