the government borrow and spend, thereby pulling people out of unemployment and pushing up capacity utilisation to normal levels. There are drawbacks: the subsequent deadweight loss of financing all the extra government debt that has been incurred, and the fear that too rapid a run-up in debt may discourage private investors from building physical assets, which form the tax base for future governments that will have to amortise the extra debt.
But when you have only two tools left, neither of which is perfect for the job, the rational thing is to try both — credit policy and fiscal policy — at the same time. That is what the Obama administration is attempting to do right now. (via Four ways to fight depression- Comments & Analysis-Opinion-The Economic Times).
How about a fifth way, Mr.Delong!
How about reducing the compliance overload on small businesses. Small businesses typically spend between 30%-300% of the profits on compliance. In a country like India, this finally results in either non-compliance or worse, in corruption.
And how about a sixth way!
What about expanding liability, instead of limited liability. While LLCs can have limited outward liability, they can create unlimited inward liabilities - in the way of debt, bonds, debentures, notes, paper, et al.
I can similarly point out many other ways - which are inconvenient - but then that is what needs to be done.
There is economics and there is fraud. With people like Delong & Co. around, one doesn't know where economics stops and fraud begins.
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