tag:blogger.com,1999:blog-2761684730989137546.post8071079217410867588..comments2024-03-28T07:50:06.102-04:00Comments on Mike Norman Economics: Bill Mitchell — Reliance on monetary policy is mindless, ideological nonsensemike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2761684730989137546.post-39095455954010638192019-07-03T13:25:21.247-04:002019-07-03T13:25:21.247-04:00A weakness in interest rate adjustments not mentio...A weakness in interest rate adjustments not mentioned by Bill is that such adjustments are ENTIRELY ARTIFICIAL, and it’s a widely accepted principle in economics that the optimum or GDP maximising price for anything, including the price of borrowed money, is the free market price, not any sort of “artificially interfered with” price. <br /><br />In contrast, fiscal stimulus is based on the free market, at least in the following sense.<br /><br />Given a recession in a totally free market, prices would fall, which in turn (by definition) raises the real value of the stock of money (e.g. where gold is the basic form of money, then the price of gold rises relative to the price of other goods). Of course in the real world, prices and wages do not fall all that much in recessions because “wages are sticky downwards” as Keynes put it. However, government (and central bank) can easily engineer a rise in the real value of the stock of money: they can just create the stuff and spend it into the economy (and/or cut taxes). <br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.com