Monday, October 8, 2012
Garett Jones on Fisher, Debt, and Deflation
Garett Jones of George Mason University talks with EconTalk host Russ Roberts about the ideas of Irving Fisher on debt and deflation. In a book,
Booms and Depressions
and in a 1933
Econometrica
article, Fisher argued that debt-fueled investment booms lead to liquidation of assets at unexpectedly low prices followed by a contraction in the money supply which leads to deflation and a contraction in the real side of the economy--a recession or a depression. Jones then discusses the relevance of Fisher's theory for the current state of the economy in the aftermath of the financial crisis.
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