At a seminar in Helsinki today, Paul Krugman explained once again how massive government stimulus postponed “the end of the world”. Still, he made it clear that we don’t really know what the long-term results will be.
Bloomberg: “The trouble is, we really have no road maps. The only model is the Great Depression itself.” That “was ended by a very large spending program known as World War II and we don’t really want to repeat that.”
Thus government stimulus was akin to giving powerful unknown pain killers to a patient with an unknown illness. Of course the patient looks better right after the injection. But what are the long-term effects?