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Economic contradictions coming home to roost? Does the U.S. economy face a long-term aggregate demand generation problem?

Thomas Palley

Journal of Post Keynesian Economics, 2002, vol. 25, issue 1, 9-32

Abstract: Many argue that the current recession is the product of a temporary stock market wobble. This paper argues that the U.S. economy confronts deeper-seated problems concerning the aggregate demand generation process. For two decades, these problems have been obscured by a range of demand compensation mechanisms--rising consumer debt, a stock market boom, and rising profit rates. Now, these mechanisms are exhausted. Fiscal policy adjustments and dollar depreciation are the only stable exits from this impasse, but they must be accompanied by measures rectifying the income distribution imbalances at the root of the problem. Absent this, deficient demand will reassert itself.

Date: 2002
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Handle: RePEc:mes:postke:v:25:y:2002:i:1:p:9-32