Brad DeLong takes MMT seriously.
But suppose that you are in an intermediate case, where the Treasury and the central bank do not want to peg the currency (and the internal price level) but do not want to let it (them) do their own thing without limit either? Suppose the Treasury Secretary believes that a strong dollar* is in America’s interest. What you then have is a mix of the polar gold-standard and MMT cases. But what are the proportions of the mix?Grasping Reality with Both Invisible Hands
Between Greece And Zimbabwe (very short)
Brad DeLong | Professor of Economics and chair of the Political Economy major at the University of California, Berkeley
(h/t Mark Thoma at Economist's View)
* Bob Rubin and his protegés favor a "strong dollar" in order to "keep borrowing costs low," which translates to running a balanced budget or even a surplus, as Rubin advised Democrats in the Clinton administration to do, setting the stage for the first depression of the 21st century. This goes by the name "Rubinomics." See also the Roosevelt Institute piece with links on Rubinomics. The Rubinites are now deficit doves that think moderate austerity is called for now rather than the austere austerity of the sound money crowd.
12 comments:
Robert Rubin: "Strong dollar to keep borrowing costs low?"
Seriously??
Jesus.
Yes, Rubin believed that a strong dollar would be good for long term interest rates and encourage firm investment. He was an investment banker and this was his philosophy for stimulating the economy instead of increasing govt spending on infrastructure, R&D, etc, which the Keynesians in the Clinton administration wanted. Rubin had Clinton's ear, convincing the president that the economy was in the hands of the bond vigilantes. President Obama is convinced of the same thing by the Rubinites around him. This is what Brad deLong is implying in his question, I believe.
No accident, too, I suppose, that this appears at the time of the switch of Jack Lew with Tim Geithner. Lew comes out of Citi, just as Rubin did, and he seems to have pretty much the same economic philosophy as Rubin did. So with Obama, first is was Rubin acolytes Larry Summers and Tim Geithner, and now Jack Lew. So don't expect any shift in Obama in the second term. Progressives in Congress are already having fits of apoplexy.
Yeah they both helped run Citi right into the ground....
First time for deLong to be mentioning MMT as obviously correct for the flexible exchange rate regime. DeLong wouldn't write it without knowing that Krugman is of the same opinion. They already know MMT is entirely correct, this has become a part of the conventional wisdom, all of a sudden. We should celebrate!
Yes, nice way to sneak it in without having to come out explicitly. Huge step forward.
It's the smart play Tom.... DeLong is doing the smart thing looks like imo.... Already moving forward....
Who knows, if this gets to Pres Obama and he 'gets it' actually himself, he could get pissed and clean house and will be looking for a new staff...
From folks who have exhibited a previous grasp on this...
Rsp
Hope so, Matt, but my sense is that presidents don't know too much about finance and econ and as a result pick advisor that they trust based on their basic orientation. I think that Obama is basically a New Keynesian Rubinite with neoliberal characteristics. I don't see him shifting his stance.
It is interesting that DeLong and Krugman have been practically quoting MMT material without acknowledgement and acting as if they knew it all along. He's still presenting MMT as an extreme that could lead to "Zimbabwe."
Did y'all notice this comment by Warren Mosler?
See "exchange rate policy and full employment"
At www.moslereconomics.com on the right margin.
It's all there.
Seems as if Mr. Mosler might like to be cited if they're using his stuff or at least to have it presented accurately.
David,
No wonder Mosler wants to get cited, he basically solved the macro problem, would definitely deserve the Swedish prize.
If people knew what he knew going into 2007-2008, if they were not loaded with the nonsense of "budget constraints" and "limited fiscal space" which Krugman and DeLong mentioned in their papers all the time, we could have a truly effective response and millions would not be dumped on the heap of permanently unemployed. They basically produced pseudoscience where some dogmas went unquestioned while having huge impact on the resulting policy prescriptions. Mosler showed these dogmas were wrong, threw their theorizing in the garbage.
Real progress will happen when MMT folks replace harvard/chicago/princeton/yale folks that dominate virtually every top government position. They will get the spot not because of their pedigree but because they have been right on the money. =)
Ryan,
Even Krugman noticed what huge difference it made to Pimco to see McCulley go and be replaced by el Erian. McCulley openly said MMT "won". The industry, where economists actually matter, definitely pays attention to such little "details". These guys are pragmatic to the bone, they will simply hire people like Hatzius and McCulley because they help them make money. Academics in the end will have no choice but to align themselves with them, otherwise they will render themselves wholly irrelevant, they won't get invited on TV and given columns in national papers and this will hurt.
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