Monday, July 27, 2015

Dirk Ehnts — Schäuble supports European Treasury, which might fight recessions

The proposal of a Euro Treasury is a first ray of light that the euro zone’s policy makers have learned the lessons from 2010-14. However, it critically depends on the capability to deficit-spend, meaning that a Treasury that can use only taxes would be useless to fulfill its job of fighting recessions in the euro zone.
econoblog 101
Schäuble supports European Treasury, which might fight recessions
Dirk Ehnts | Berlin School for Economics and Law

4 comments:

Dan Kervick said...

However, it critically depends on the capability to deficit-spend, meaning that a Treasury that can use only taxes would be useless to fulfill its job of fighting recessions in the euro zone.

Not really. A treasury that could redistribute euros from savers to spenders could provide counter-cyclical stimulus, and also promote regional spending projects.

NeilW said...

"A treasury that could redistribute euros from savers to spenders could provide counter-cyclical stimulus"

You'll find that's deficit spending.

Dan Kervick said...

It doesn't have to be based on deficit spending. If you tax $100 dollars from someone who has the dollars locked up unproductively and give it to someone else who will spend it, you get more growth.

Random said...

It does if you "borrow" as well, Dan. :)
Savings is savings. Whether you tax it away by force, just "print" money and leave it as it is (my preferred option), or "borrow" it and pay corporate welfare by swapping it for a bond.
Savings and rent stop the circular flow. Alternatively issue money with an expiry date (I.e. stops being money after a period, can't be used to pay taxes and not legal tender.)