Wednesday night may have marked the “emperor’s new clothes” moment of the Great Recession, in which the world suddenly realizes its rulers are suffering from a delusion that doesn’t have to be humored. That delusion today is economic fatalism: the idea that nothing can be done to break the paralysis in the global economy and therefore that a “new normal” of mass unemployment and declining living standards is inevitable for years or decades to come.
That such economic fatalism is nonsensical is the key message of a truly historic speech delivered on Wednesday by Adair Turner, chairman of Britain’s Financial Services Authority and one of the most influential financial policymakers in the world. Turner argues that a virtually surefire method of stimulating economic activity exists today and that politicians and central bankers can no longer treat it as taboo: Newly created money should be handed out to the citizens or governments of countries that are mired in stagnation and such monetary financing of tax cuts or government spending should continue until economic activity revives.Reuters
A breakthrough speech on monetary policy
Anatole Kaletsky | Financial Economist, Reuters
(h/t Max Keiser)
7 comments:
Unfortunately, I can't seem to leave any comments to support the fellow, despite having signed up for a Reuters account. The hyperinflationistas are having a good ole time.
Anybody else tried?
The policy advocated by Turner is one advocated by most MMTers isn’t it? At least Warren Mosler’s payroll tax reduction is an example of the policy. The policy simply consists of merging fiscal and monetary policy, and quite right. It’s also advocated in this work which advocates full reserve banking:
http://www.positivemoney.org.uk/wp-content/uploads/2010/11/NEF-Southampton-Positive-Money-ICB-Submission.pdf
There are of course a thousand time wasters in academia who would prefer to keep monetary and fiscal policy separate as it gives them something to witter on about.
Also I notice that Turner cites a 1948 paper by Milton Friedman. I’ve cited that paper a hundred times on my blog because I think it’s significant. Turner would have been lost if he hadn’t had MMT blogs like mine to plaguarise?!?..:-)
Newly created money should be handed out to the citizens or governments of countries that are mired in stagnation and such monetary financing of tax cuts or government spending should continue until economic activity revives.Anatole Kaletsky
Yes and morally it makes perfect sense; the government-backed credit cartel in our so-called "free market economy" has cheated both debtors and non-debtors with negative real interest rates, especially in housing. Therefore EVERYONE deserves restitution (well, perhaps not many of the rich do since they probably benefited from the looting but it would not cost much to give them equal restitution too and it would preclude cries of "Unfair!" from that quarter.)
OTH, Keynes' idea of burying money so that people have to waste their time finding and digging it up is offensive (assuming he was serious). The same criticism applies to a Jobs Guarantee and whoever heard of having to work to receive one's just restitution for theft?
A caution: A sufficiently large universal bailout WILL kick start the economy. But then a potential problem is that the banks, who normally create 97% of the money supply with their government enabled credit creation power, will cause serious price inflation and that the universal restitution program will be blamed.
"Keynes' idea of burying money so that people have to waste their time finding and digging it up"
I think he was taking the piss out of goldbugs ("digging money out of the ground").
"one's just restitution for theft"
Increasing prices isn't a crime, assuming that's what you're referring to ("theft of purchasing power"). If it was you could sue your local shop every time they raised the price of chocolate bars.
Increasing prices isn't a crime, y
Counterfeiters are put in jail because they increase prices. How is the government backed credit cartel any different except they are legal and except they lend not spend their "money" into existence? And since everyone is not equally "credit-worthy", those who are typically get to buy at lower prices than those who aren't since those who aren't must save to acquire the needed purchasing power and saving takes time during which time prices might easily rise because of the spending of the so-called "credit-worthy."
Of course endogenous money creation is good but it should be done ethically.
Counterfeiters are put in jail for fraud. You could prosecute the banks for fraud, and the government for permitting it or encouraging it perhaps.
I'm just saying "theft of purchasing power" doesn't exist in a legal sense. It's quite a vague accusation. You could also accuse those that demanded higher prices (i.e. anyone who sold a house for example), not just those that facilitated the purchases.
Higher prices generally require a larger money supply though the velocity of money can provide some support. But there are limits on how fast money can circulate while the banks' ability to create purchasing power is only limited by the number of "credit-worthy" borrowers. And during a boom, the number of "credit-worthy" borrowers greatly increases.
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