There is no financial crisis so deep that cannot be dealt with by public spending

This paper aims to explain the current world financial crisis in terms of an understanding of modern monetary macroeconomics, which specifically includes all countries where the government has sovereignty in the issue of the currency. The paper shows that the prevailing orthodoxy in macroeconomics has failed and that the belief that markets self-equilibrate at levels that are remotely socially acceptable is erroneous. Further, the paper shows that markets do not self-regulate in ways that avoid major financial upheavals and these crises have profound impacts on the real economy. In particular, the body of literature that is built upon the belief that fiscal policy should only be a passive support to an inflation targeting monetary policy is shown to be highly damaging to the long-term growth prospects of modern monetary economies.