Must-Read: I do not understand this at all: if "the supply side... is the real constraint", then we would not be seeing central banks and governments incapable of reaching their inflation targets. We would now be seeing inflation rates that had raced ahead of inflation targets and were still climbing:
Kenneth Rogoff: [The Fear Factor in Global Markets by][]: "Some say that governments did not do enough to stoke demand.... That is true... [but] not the whole story...
...The biggest problem burdening the world today is most countries’ abject failure to implement structural reforms. With productivity growth at least temporarily stuck in low gear, and global population in long-term decline, the supply side, not lack of demand, is the real constraint in advanced economies...
This paragraph, by contrast, seems unexceptionable:
Kenneth Rogoff: The Fear Factor in Global Markets: "There are other explanations for volatility.... The simplest is that things really are that bad...
..>Financial globalization has profoundly deepened interlinkages, magnifying the transmission of shocks. There are large pockets of fragility and weakness in world debt markets, with current monetary easing covering up deep-rooted problems.... In a thin market, a small change in demand or supply can sometimes require a big shift in prices to restore equilibrium. The most convincing explanation, though, is still that markets are afraid that when external risks do emerge, politicians and policymakers will be ineffective in confronting them. Of all the weaknesses revealed by the financial crisis, policy paralysis has been the most profound...
