What Phelps should have said!
Paul Krugman quotes a clearly correct statement from Keynes:
“The resources of nature and men’s devices,” Keynes wrote, “are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life. … But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand.”
It is still …a delicate machine, the workings of which we do not understand and the obama administration is no more clueful than the previous occupants.
Local and world economies would work much better, perhaps as well as ant colonies, if giants did not continually step in them. Alas, governments have been stepping on the operation of economies for 100s of years and we still have not learned the lesson that we must keep them out; restrain them to their possibly appropriate role of fighting fraud and the use of force.
All the bail out and stimulus schemes already hatched and yet to be born are no better than throwing mud on the wall to see what sticks.
It will be painful to disengage the government gangs but, really, if you want any chance at all of these cycles not continually repeating on ever larger scales we must do so.