This key chapter opens with background assumptions (full employment is not assumed, the financial sector is key, and unemployment is an unnecessary evil) and then starts building a basic macro model based on the injection-leakages approach. It identifies physical investment spending as the key injection and then spends considerable time explaining the determinants of investment and the environment in which relevant decisions are made. This is perhaps the most complex part of the volume, but real-world data are referenced frequently in the hope that this makes the argument easier to follow. About halfway through the chapter, there is a shift in focus toward the financing of investment. This requires a discussion of banking and credit/money creation. The chapter ends with miscellanea regarding investment spending (including some specific observations from Kalecki and Mitchell).

Chapter 3 tackles issues that are not necessarily directly related to the business cycle but will be important at various points in the historical section of the volume that covers every US business cycle since 1954. These include inflation, monetary policy, fiscal policy, tradeable securities, and secular stagnation. Because it is so poorly understood and since it will play a key role in the cycles of the 1970s and 1980s, more than half of this space is devoted solely to understanding inflation. The idea that it is a function of money supply growth is challenged, and a new set of definitions and classifications is offered.

Neoclassical economics – especially macro – is a mess. It has become irrelevant and divorced from the real world. Unfortunately, theory is important because it informs policy. This volume takes an alternate approach, one following the work of earlier Institutionalist and Post Keynesian pioneers.

The chapter opens with a quick review of the preceding theory and an outline of what one should expect to see in the real world if that theory is relevant. Several data points are selected as being the most significant, and the manner in which they fit on average over the entire period is demonstrated. These same data points are then repeated within each cycle as the chapter continues. Ten expansions and recessions are explained, including considerable detail as drawn from contemporary and later accounts. On occasion, there are side trips to related concepts such as shifting income distributions, the dramatic decline in the labor force participation ratio, secular stagnation, and the financialization of the economy.

Economics is ultimately about policy. To this point, the volume has laid out a theory that explains business cycles, inflation, monetary and fiscal policy, and the financial sector, and it has tested its predictions by comparing them to historical events. It has also referenced the major economic and social costs associated with both the business cycle and the general tendency of the economy to come to rest at less than full employment. Fortunately, there exists a policy that can address these: the Job Guarantee. The chapter (vetted by two preeminent scholars in the area: Pavlina Tcherneva and L. Randall Wray) goes into detail on the structure, strengths, weaknesses, and financing of such a program. It concludes that there is no doubt that we are suffering needlessly. Unemployment is an unnecessary evil, and we absolutely can afford to address emerging crises such as elder care, income maldistribution, and global climate change. Indeed, we cannot afford not to.

How George Peabody’s firm became ensnared in the panic, jeopardizing Junius’s new partnership with Peabody and Morgan’s training there. The first test of Morgan’s mettle: Could he meet the challenge of a financial crisis? He showed deep empathy and compassion for his father’s anxiety and discomfort as Junius and George Peabody managed their way through the crisis. Father told him in 1857, “You are commencing upon your business career at an eventful time. Let what you now witness make an impression not to be eradicated. In making haste to be rich how many fall; slow and sure should be the motto of every young man.”