The key insight of this book is that monetary and fiscal policies are only effective under differing circumstances. Applying monetary loosening when businesses are struggling to repay debt is the classic pushing on a string. Instead fiscal expansion allows the state to provide the basis for growth. This neatly explains the global financial crisis, and did so before it really got going ( written in Q2 2008, before Bear Stearns and Lehman collapsed).
Professor Koo has done a wonderful job of making economics easy to understand. He also places the current (2011) period in context and gives his 'Balance Sheet Recession" idea a good basis. He breaks down a typical business cycle into 7 stages. Then he shows how low interest rates combined with no, or low loan demand show companies are in fact paying down debts. He goes on to explain that economics does not teach anything but that companies will maximize profits -- but what of Japan, and the companies (many, many) that minimized debt. Along with company debt servicing (similar to savings) and household savings, the onus is on govts to spend and keep the gdp up.
He tackles neoclasiscists who hate money, gold bugs, trust in fiat money and how one can value money (not just as a tradeoff with some precious metal), he literally anticipated the Eurozone problems, shows all is not so simple and generally gives one a great overall picture of how the exonomies of USA, Europe, Japan in particular and China has and are interacting.
A great easy read.
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