Don't tighten policy yet!

There is an interesting article in this week's Economist by Christina Romer (chair of the Council of Economic Advisors in the US) in which she explains that errors were made late on during the Great Depression when policy was inadvertently tightened (by cutting back various items of government spending and the ending of some tax reductions) and unemployment shot up again (from 15% to 19%). Her point is: We shouldn't repeat the same mistake now.