Einhorn: The Real Lesson of 1937-8

David Einhorn – President of Greenlight Capital, which manages around $5 billion dollars – says that people claiming that the lesson of 1937-8 is not to withdraw stimulus too soon are wrong:

An alternative lesson from the double dip the economy took in 1938 is that the GDP created by massive fiscal stimulus is artificial. So whenever it is eventually removed, there will be significant economic fall out. Our choice may be either to maintain large annual deficits until our creditors refuse to finance them or tolerate another leg down in our economy by accepting some measure of fiscal discipline.

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