“The orthodox policy solution is to create demand for labor. To manufacture scarcity. To create a pressure differential between money sources and money sinks, such that almost everyone in the country is required to do things, to alleviate that pressure”:
Can anyone explain how the government would manufacture this kind of scarcity? And what do people do to alleviate this pressure?
I think quantitative easing is an example (if I understood the post correctly, which I’m not sure about). By buying up bonds, the government is putting more dollars into the economy, which reduces the “amount of stuff produced per dollar”, thus creating scarcity (in other words, QE increases aggregate demand). To alleviate this pressure, people make more stuff in order to meet the excess demand (i.e. unemployment rates go down). Forcing the unemployment rate down is the same as “requiring almost everyone to do things”