There have been two major crises in economics, both of which occurred during the Great Depression or Great Recession in major western industrial countries, and led to a series of fundamental changes in economic policies, economic theories and economic analysis methods. People usually call the qualitative leap of economic policy, economic theory and economic analysis method that comes with the economic crisis the revolution of economics. The first economic crisis occurred during the Great Depression in 1930s. Say's law, which takes supply automatically creates demand as a simple expression, obviously can't explain the Great Depression of 1930s, especially the unemployment rate of 25%, because it denies the possibility of economic crisis and unemployment, so the Keynesian Revolution came into being. The second economic crisis occurred in the early 1970s. The "hybrid" of Keynesian economics-the alternation of inflation and unemployment described by Phillips curve, and the discretionary policy prescriptions can't seem to explain and cure the "stagflation" economy in the 1970s, so there was a counter-revolution of monetarism, and then the neoclassical comprehensive school, the reasonable expectation school and the real business cycle school merged into the mainstream economics-neoclassical economics. Several other revolutions in the history of economic theory, such as marginal revolution, sraffa revolution and reasonable expectation revolution, are mainly manifested in the changes of economic analysis methods, frameworks and centers of gravity, and their influence on economic policy obviously cannot be compared with Keynesian revolution. Does the current subprime mortgage crisis and its possible financial crisis and Great Depression mean the third crisis in economics? Will it lead to a new economic revolution? Let's discuss the possibility and main features of a new Keynesian revolution by analyzing a series of government intervention measures taken by western countries in response to the crisis, especially the unprecedented monetary policy intervention measures. 1. The drums of government intervention are clamoring-the Bush cabinet has made a 180-degree turn. It is rare that the protracted subprime mortgage crisis and the bursting of the American real estate bubble bring panic to American society. Since the 200 1 war on terrorism, the American government and people put economic issues above the war on terrorism and Iraq for the first time, and regarded them as the most important issues in American society. Politicians from both parties, the Cabinet and Congress in the United States turned to government intervention without exception, praying for a panacea to avoid and get out of the crisis. The Bush administration and party elders have always flaunted economic liberalism and opposed government intervention in the economy. While denying the economic recession, they launched a series of government intervention measures. In addition to continuing to promote the plan of tax cuts for the rich to stimulate the economy, the Bush administration recently launched a tax rebate plan, in which the federal government gave each family 500 to 1200 dollars to stimulate consumer demand. The Democratic Party has always advocated government intervention in the economy. The Congress they controlled not only immediately approved the Bush administration's tax rebate plan, but also accused the Bush administration of being too late and not strong enough to advocate more active intervention. Two presidential candidates of the Democratic Party recently launched a $30 billion rescue plan for the subprime mortgage crisis. Not long ago, Bush warned Congress not to overreact. A few weeks later, he turned to support the rescue. John McCain, the US presidential candidate and our party candidate, just plausibly said that the government should not help those who lost their houses because of the subprime mortgage crisis, because this is tantamount to encouraging speculation and taking risks, punishing cautious investors and people who are diligent in saving, which is the "moral hazard" described by economics. After one week, they immediately changed their course and agreed to help the "victims" of the subprime mortgage crisis. It seems that the era of large-scale government intervention in the economy has arrived. 2. Unprecedented monetary policy intervention-the "reluctant revolution" of the Federal Reserve. Facing the possible financial crisis caused by the subprime mortgage crisis, the Federal Reserve tried its best to invent and adopt a series of unprecedented intervention measures. In addition to reducing the federal funds rate from 5.25% to the current 2% for seven consecutive times since last September, not long ago, in order to save Bear Stearns, one of the largest investment banks, from bankruptcy, the Federal Reserve provided huge funds to support JPMorgan Chase in purchasing the bad assets of Bear Stearns. At the same time, the Federal Reserve also accepted the non-performing real estate loans of major financial institutions as collateral, provided $200 billion in government securities loans to investment banks, provided $654.38+00 billion in credit to other banks and savings institutions, and opened discount windows to financial institutions of non-commercial banks. This series of emergency measures and innovations indicates that the objectives, rules, procedures, styles and even basic functions of the Federal Reserve's monetary policy have undergone major changes. On March 3 1 this year, the US Treasury Department published more than 200 pages of blueprint for strengthening the government's supervision and management of the financial system, mainly giving the Federal Reserve greater power to supervise all financial institutions and financial markets, including American commercial banks, especially investment banks, hedge funds and financial futures markets, in order to protect consumers' rights and enhance the ability of the financial system to prevent and resist financial risks. Bernanke immediately agreed. As a monetary theory expert with a low-key academic background, Bernanke has always advocated narrowing the scope of the Fed. Focus monetary policy on fighting inflation. In particular, he has always opposed the Fed's intervention in the stock, securities and real estate markets. This 180 degree U-turn in the monetary policies of the Federal Reserve and Bernanke reflects the helplessness of the monetary theory of mainstream economics in the subprime mortgage crisis and the helplessness of traditional monetary policies in the face of the financial crisis. Undoubtedly, it provides a golden opportunity for experts who study monetary theory to experiment and breeds a new revolution in the field of monetary theory and monetary policy. American Business Weekly called it "an unwilling revolution". 3. The silence of mainstream economics-the third crisis of economics. Unlike the panic of politicians and the inability of policy makers to cope, mainstream economists rarely remain silent and reserved in the face of the subprime mortgage crisis and large-scale government intervention. Obviously, the self-correction mechanism of the neo-liberal market can automatically restore the economy to equilibrium, and the argument that government intervention can only aggravate economic fluctuations has no market at present. They are unwilling to support government intervention and can't come up with effective rescue methods. They can only keep silent and pray that the "invisible hand" can save the omnipotent free market economic system they admire and protect their beloved market fundamentalist economics from the crisis. The increasingly severe new stagflation economy is undoubtedly a challenge to neoclassical economics, which is brewing the third crisis of economics. It marks the end of the neo-liberal school and a new Keynesian revolution is quietly going on. The cruel economic reality challenges economists to create new economics that is more in line with the real world, so as to better explain the complex and changeable unbalanced world and provide theoretical basis for formulating better economic policies. 4. The urgency and possibility of the New Keynesian Revolution. A revolution in the field of economic theory usually occurs in the historical period when the new economic phenomenon completely negates the traditional economic theory. More importantly, it needs to be based on the systematic anatomy and criticism of traditional theories by courageous and knowledgeable academic masters who rushed out of the traditional theoretical camp. This revolution was kicked off by akerlof, the Nobel laureate in economics and chairman of the American Economic Association, who delivered a keynote speech at the annual meeting of American Economics at the beginning of last year. In his speech, akerlof systematically examined and criticized how the five neutral hypotheses of neoclassical economics go against reality by introducing norms and extensively using common phenomena in the real world: consumption depends on wealth rather than current income (permanent income hypothesis); Investment expenditure has nothing to do with current profits; In the long run, inflation has nothing to do with unemployment; Monetary policy cannot stabilize output and employment; Tax and fiscal deficits cannot affect current consumption. Akerlof's conclusion is that after fully considering the influence of norms on people's decision-making behavior, Keynesian economics can even restore many of their conclusions about cyclical fluctuations and macroeconomic policies, such as credit constraints, imperfect markets, asymmetric information, tax distortions, staggered contracts, uncertainties, menu costs and rationality of constraints, without considering the various "frictions" added by neo-Keynesian economics. It is impossible to establish a new theoretical system of economics overnight, and it needs the joint efforts of a generation of economists. The new economic theory needs the support of new economic reality, needs to be tempered in the melting pot of economic crisis, and needs to be tested by new successful economic policies. At present, it is generally believed that the subprime mortgage crisis and its possible financial crisis are caused by the government's long-term neglect of the supervision of the financial industry and the inevitable result of neo-liberal economics in practice. Therefore, the new economics should focus on abandoning the stereotype of equilibrium economics and flogging market fundamentalism, focusing on the government's regulation, intervention and supervision of economic activities, and focusing on standardizing the position of economic analysis and income distribution in economic analysis. The worsening subprime mortgage crisis is spreading to the whole world. Following the recent bursting of the real estate bubble in many other countries, the voice of countries around the world demanding government intervention in the real estate market and financial market is growing, and more and more central banks are considering and launching corresponding intervention measures. The increasingly complex, changeable and dangerous economic world once again calls on a new generation of economists to shoulder the mission entrusted to them by history: let economics go out of the ivory tower and move towards a real world economics.