A Question, Answered by Warren Mosler
Japan, US, ECB, they're all just bureaucracies doing what they do ... nothing ... until absolutely forced to, kicking & screaming.
Plus, it gets worse. It's hard to self-tune & select well from a pool of options you refuse to adequately fill. If you limit your options & reduce baseline diversity ... voila ... you steadily degrade the statistics & probability of making high quality selections. Duh!
Selection & option-diversity go hand in hand, inseparable, catalyzed by threshold liquidity & distributed initiative.
What part of 2-stage optimization don't bureaucrats get?
It doesn't matter what wave you select if you don't paddle your surfboard far enough out into the damn ocean!
This ain't rocket science. Just bureaucracy in inaction.
This ain't rocket science. Just bureaucracy in inaction.
8 comments:
"The problem is that economists have not recognized the failure of Keynsian economics. I think the uniform failure of deficit spending to promote growth has to be recognized."
WM: "They just didn’t run large enough deficits."
Maybe it's not just about the size of the deficit but the quality of it. Over the years Japan has practically paved over the countryside and as I recall they built one of the largest suspension bridges in the world, but only about 40 people per day use it. Not a very good return on investment. One thing Japan has not done to my knowledge is cut taxes in any meaningful way. I can't help thinking that the extra money in the hands and pockets and bank accounts of the millions of people who earned it would be allocating far more efficiently than all the government spending by central planners.
Maybe the appropriate size of the deficit is a necessary condition but not a sufficient one. For example, if the $NFA goes directly to savings instead of flowing through the economy, the result is nil. In other words, multipliers count and that means targeting flows counts.
Tom - I understand that markets are not perfectly efficient and in fact sometimes they are way off base, but I believe in the collective wisdom of the markets a lot more than I do in central planners. If people opt to save and/or pay down more of their debt with the extra money they had from they SS payroll tax holiday than they spend on consumption, then they are making a rational decision. They are sending a message to the markets. I am neither a debtophile nor a debtophobe but I do believe that if you live beyond your means sooner or later you will be destined to live beneath your means. Of course I'm talking on the household level.
That said, I can't say I will shed any tears if sequestration takes a chunck out of the defense budget. Problem is that it won't touch any of the 950 US military bases in foreign countries. As I see it, a big problem with the policy option flexibility of a fiat currency is that it makes it too easy to become engaged in unjustified, endless wars like Iraq and Afghanistan where real resources, i.e. blood and treasure (capital) are wasted.
Ed, this is part of the problem. Some % of the deficit will be saved rather than spent in a "balance sheet recession" following a financial crisis. Economists and policy makers reckoning the appropriate size of the deficit need to take this into consideration. In other words, the deficit will have a mean multiplier that is made up of the sum of many spending multipliers, the saving multiplier being zero. This is why an advantage of fiscal policy involves targeting. It's about multipliers. Just throwing funds in doesn't guarantee the outcome wrt effective demand addressing demand leakage.
Yes Tom I see your point, but among of the biggest multipliers I have seen over the past 10 years are the undeclared wars the US has become entangled in which seem to be multiplying like rabbits.
The story in the link below from News Time Africa (NTA) was reported in the Associated Press on Christmas Day but somehow failed to make it into most Anglo-American news outlets.
Full-scale Invasion as the United States Deploys Troops in 35 African Countries
http://www.newstimeafrica.com/archives/30714
Ed, I think that this is what President Eisenhower foresaw and warned against as the increasing "military-industrial complex" in a farewell address. Both parties agree and have the country largely convinced that military spending is not to be questioned for reasons of patriotism.
See Military Keynesianism
In this sense,both parties are basically Keynesian, with the GOP favoring military Keynesianism over other "public investment."
Did you see McCain's recent diatribe against the sequester, arguing it would cost hundreds of thousands of jobs related to military supply, not to mention the spill over effects, which would involve many more job losses? Purely Keynesian argument.
"Ed, I think that this is what President Eisenhower foresaw and warned against as the increasing "military-industrial complex" in a farewell address. Both parties agree and have the country largely convinced that military spending is not to be questioned for reasons of patriotism."
Tom - You are preaching to the choir. Foreign aid is mostly about the military industrial complex where middle class and low income tax payers here in the US end up subsidizing wealthy tyrants in foreign countries who buy weapons from the US defense industry. One of the things that bugs me most is that the anti-war left is AWOL.
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