Wednesday, May 30, 2018

Brian Romanchuk — Book Review: Prosperity For All

Professor Roger E. A. Farmer has written Prosperity For All: How to Prevent Financial Crises, in which he lays out the case for creating a sovereign wealth fund whose objective is to stabilise financial markets. If we can eliminate financial crises, we can avoid the rise in unemployment that results. Although that is an interesting concept, I was highly skeptical about the idea before I read the book -- and my skepticism remains after reading it. Instead, the discussion of macro theory within the book is why it is of interest.
Bond Economics
Book Review: Prosperity For All
Brian Romanchuk


Konrad said...

“Professor Roger Farmer lays out the case for creating a sovereign wealth fund whose objective is to stabilize financial markets.”

The USA already has a sovereign wealth fund, and it is worth $21 trillion. It’s called the “national debt” and it consists of money that various parties have deposited in Fed savings accounts. Since that money cannot be spent, or otherwise used as regular money, it is called “reserves” (hence the Federal Reserve Bank).

The purpose of reserves is to stabilize the regular money system and the financial system. Sometimes this stabilization goes awry, since Wall Street is infinitely corrupt. However the U.S. government can create infinite dollars out of thin air to bail out Wall Street, and those dollars are accepted worldwide.

For the USA, the way to avoid financial crises is through regulation, which the financiers have done away with by bribing politicians.

Of course, the ultimate way to avoid financial crises is for the general population to be less selfish and greedy. At every socioeconomic level, most people (not all) envy and revere those above them, and despise everyone below them. This is what maintains stratification, corruption, and instability.

As for the book review, I stopped reading when I came to this…

“The traditional Keynesian way to damp down the business cycle is to use fiscal policy as well as monetary policy. Professor Farmer dismisses fiscal policy, arguing that expenditure multipliers are low.

Right. Sure.

Matt Franko said...

You are butchering the terminology...

Konrad said...

Ours is an era of endless lies and b.s.

Therefore candor, honesty, and simplicity is condemned as "butchering the terminology."

"In a time of universal deceit, telling the truth is a revolutionary act."

Andrew Anderson said...

For the USA, the way to avoid financial crises is through regulation, ... Konrad

Let's have 100% private banks with 100% voluntary depositors and it won't matter if they go bust since the economy can carry on while the wreckage is cleared.

And no, we've never had true free banking in the US since we've never had 100% private banks with 100% voluntary depositors.

Moreover, the process of getting to 100% private banks with 100% voluntary depositors could erase a lot of private debt (without disadvantaging non-debtors) via equal fiat distributions to all citizens as government-provided deposit insurance is progressively abolished (say a 10% reduction in the insured limit per year) in order to provide the new "reserves" needed for the transfer of at least some currently insured deposits with the banks, credit unions, etc. to inherently risk-free accounts at the central bank itself.

Bob Roddis said...

It is the fiat funny money regime which causes the instability in the first place. Fiat advocates must know this or else they would actually engage Austrian analysis on the merits and refute it. They know they cannot refute it so they pretend it does not exist.

Andrew Anderson said...

Anything issued and accepted by government for the payment of taxes is FIAT, Bob.

But the Austrian Economists want to make fiat NEEDLESSLY EXPENSIVE to:

1) Limit the issue of it.
2) Profit special interests such as gold owners.
3) Enable lazy, risk-free returns via deflation as the population and economy grows faster than the fiat supply - thereby enabling the old to loot the young and lazy cowards to free ride on the energy and risk-taking of others.

One other thing, Austrians focus exclusively on the limiting the SUPPLY of fiat but what about increasing the DEMAND for fiat by allowing all citizens to use it via inherently risk-free checking/debit accounts at the central bank itself? Where has an Austrian ever advocated that?