Sunday, August 11, 2019

Bill Mitchell — We are approaching a period of fiscal dominance

The dissonance in mainstream economics and the political debate about policy settings is getting deeper and more public. We now have examples of central bankers ‘throwing their hands up in the air’ and nearly begging governments to abandon their obsession with fiscal surpluses, and, instead, use fiscal policy to stimulate waning economic growth. What I think is happening is that we are entering a period of fiscal dominance, which will represent a categorical rejection of the mainstream macroeconomics consensus that has dominated policy making since the 1980s – the neoliberal era. In turn, this shift will ratify the main precepts of Modern Monetary Theory (MMT). We are observing paradigm shift occurring as the dominant neoliberal paradigm fails at every turn. There is a long way to go though before the practitioners acknowledge that such a shift has occurred. But there is progress.…
Woo hoo! The last mile is closing.

Bill Mitchell – billy blog
We are approaching a period of fiscal dominance
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

1 comment:

Ralph Musgrave said...

Fiscal policy, monetary policy, fiscal policy, monetary policy. Yawn.

Having two different ways of influencing demand makes about as mumch sense as a car with two steering wheels driven by a husband and wife having a matrimonial row: witness Trump and earlier presidents' quarrels with the Fed.

The MMT system where the state (government and central bank) simply print money and spend it (and/or cut taxes) when stimulus is needed, makes far more sense. As for interest rates, as Warren Mosler has argued, they should be left permanently at zero (except perhaps in emergencies).