Here is an interesting follow-up article where Geoff Coventry expands on his insightful Freedonia and Moronia sovereign currency parable. He examines further the differences between having a fixed exchange rate currency (Gold standard) and a non-convertible, floating exchange rate currency (US monetary system) and how these differences relate to international trade, Govt spending and their respective effects on aggregate demand.
Make sure to visit Geoff's blog Its The People's Money, A nation's money belongs to the people and should serve the public good. to drink in his many months worth of contributions to the MMT economic community. And please follow Geoff on twitter @gladkiwi
Cross-posted from: http://itsthepeoplesmoney.blogspot.com/...Daily Kos — Money and Public Purpose
Angst in Freedonia: are there no alternatives to austerity?
Auburn Parks
2 comments:
Very good post. Really liked the comparison of a demand boost through government expenditure with a demand boost through export demand. Not only are the macro effects the same and the benefits to the domestic economy greater in the case of deficit expenditure (enhanced real assets or consumption at home, no need to cut wages, etc.) but fiscal policy is under the direct control of the currency sovereign whereas attempts to encourage a boost in export demand rely on indirect means that are slower and more uncertain in their effects (for example, wage cuts to increase competitiveness may just be countered by wage cuts abroad).
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