10 fallacies of the Great Recession

I am getting a new (work) computer so I have been doing a bit of clean up on my old computer. While doing the clean-up I came across the following list that I apperantly did at some point.

This is 10 fallacies of the Great Recession:

1)      Low interest rates = easy monetary policy

2)      The price of money is the interest rate (credit and money is the same thing)

3)      Confusing shifts in demand and supply curves: No, lower oil prices is not helping the US economy if it is caused by a drop in global AD

4)      Competitive devaluations won’t help if everybody devalue at the same time

5)      We are in a “New Normal” – the hangover the theory of the Great Recession. We are in a balance sheet recession

6)      We are out of ammunition – interest rates are near zero so we can ease not monetary policy anymore (we need fiscal easing)

7)      The Great Recession was caused by a property market bubble

8)      Fiscal policy is a useful tool to combat the crisis

9)      Central banks are printing money like hell – we will get hyperinflation (confusing demand and supply for money)

10)   Higher inflation is bad for private consumption

Leave a comment


  1. Justin Irving

     /  April 5, 2014

    “2) The price of money is the interest rate”

    If you think about it, the price of money is the…GDP deflator! 1/NGDP gets you to the same place as well.

  2. W. Peden

     /  April 5, 2014


    Great post. Occasionally, one comes across an article which makes every last fallacy!

    Justin Irving,

    I’d go broader and say that the price of money is the price level as a whole, not just the prices of final goods. In short, the price of money what you have to give up to get money. Money is cheaper where the price level is higher and more expensive where the price level is lower. David Friedman made this point very well in an old textbook.

  3. Benjamin Cole

     /  April 10, 2014

    Excellent blogging!

  1. Browsing Catharsis – 04.08.14 | Increasing Marginal Utility

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