Boing Boing — Trump administration considers a centrally planned economy to deal with coronavirus

The Trump administration is reportedly considering the possibility of re-implementing the Defense Production Act. Originally enacted during the Korean War, the Act essentially empowers the President to control the means of production—the idea being that it would be in the interest of the nation's defense to force private manufacturers to focus their production efforts on things that would benefit the country in a time of tenuous resources....

"Reportedly." Rumor maybe, but interesting.

China did not really have to implement this, since it is largely the current system there, but the Chinese leadership gripped the reins tighter, basically shutting the country down. This made sense especially at the time of Chinese New Year, when the entire country "goes home" for vacation to their ancestral locations.

Boing Boing
Trump administration considers a centrally planned economy to deal with coronavirus

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Dr. Bruce Aylward, who led the 25-member team, said that in absence of a drug or vaccine which could have fought the virus, China resorted to publicly available standard health tools like case finding and contact tracing with the kind of rigor and innovation “on a scale that we have never seen in history.”...

Dr. Aylward also said that China’s response was agile and science-driven. It was said that by the time the report had been compiled, the Chinese government had updated its clinical guidance six times in total as new findings about the virus and the illness kept coming in.

Stringent measures such as sealing off towns and ordering people to stay in their homes changed the course of the outbreak, Dr. Aylward said, mentioning that the decline is now happening sooner than expected....

Dr. Aylward also noted that the world is not ready to tackle the epidemic yet, but with the model that China has produced, the process can be sped up. He urged countries on the brink of the epidemic to take up tough and aggressive programs, mentioning that key steps could be planning for the heavy demand on hospitals, providing respiratory support such as ventilators and deployment of staff for contact tracing....

Peoples Dispatch
COVID-19: WHO-China joint mission says China’s handling of the disease is historic
Sandipan Talukdar

Close Encounters of a Green New Deal Kind — Douglas Holtz-Eakin

In the end, MMT looks like an extreme version of conventional economics in which there is no independent monetary policy and there are a lot of unused resources. But when resources get tight, the reflex is command and control central planning.

This cuts to the quick of it. The question is how much market state (where free markets determine outcomes, in theory at least) and how much welfare state (where the economy is managed based on desired outcomes). This is an ongoing dialectic among Libertarians, conservatives, liberals and progressives in the US.

However, the GND is different in that it is a special case. The name indicates that it is being compared to the New Deal that addressed the effects of the Great Depression. Proponents also point to the American economic response in WWII, in which John Kenneth Galbraith played a major role. In the minds of the proponents of the GND, this is about government mobilizing resources and "taking charge" in order to meet an existential threat. Opponents view this as overreaction to a supposed threat that does not appear to exist, in their minds.

This is reminiscent of the lead up to WWII, where Americans in general preferred isolationism to preparation until events were forced on them at Pearl Harbor. Then the race to catch up.

American Action Forum

Close Encounters of a Green New Deal Kind

Douglas Holtz-Eakin | President

Michael Pettis — Why market liberalisation now may hurt China more

In the end, while standard macroeconomic reforms may work in theory -- albeit under an unrealistic set of assumptions -- they’ve never worked in practice. Rather than eliminating the controls that protect China from a financial crisis, leaders should confront their debt problem head-on and begin deleveraging.

For that to happen, it would help if the decision-making process were more, not less centralised. Only forceful action from the top can overcome the tremendously powerful vested interests that are blocking the redistribution of local-government wealth.

A more liberal China may be desirable in the abstract -- but not until a more controlled China gets a handle on its debt problems.

Today
Why market liberalisation now may hurt China more

Michael Pettis | Professor of Finance at the Guanghua School of Management at Peking University in Beijing

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While China's government debt remains contained, at 46.9 percent of GDP as per latest figures from the Bank for International Settlements, top policymakers have recently raised concerns about a sharp build-up in household debt.

Outstanding household consumer loans have surged close to 30 percent since the middle of last year and reached 30.2 trillion yuan as of October.

Outstanding yuan-denominated property loans amount to 31.1 trillion yuan and individual mortgage loans totals to 21.1 trillion yuan as of the third quarter of 2017, data from the People's Bank of China showed.

Yet, at the same time, China's economy is said to be held back by the traditionally high level of household saving, which is supposedly holding back restructuring from an investment-based economy to a consumption-based one.

CNBC
China's debt is growing at a faster pace despite years of efforts to contain it

Reuters

George Cooper — Monetary Reform – Be Careful what you aim for

In yesterday’s post – Money and the magical mathematics of Brahmagupta – I tried to explain the instability of our monetary system with some simple analogies. In this post I am going to offer a few thoughts on one proposed way to deal with this instability. The proposal in question is that of the campaign group Positive Money which is arguing for what it calls a Sovereign Monetary system.

I find myself in an odd position with respect to the arguments of Positive Money. As far I can tell their analysis of the causes of financial instability are in complete agreement with my own thinking (see yesterday’s post or The Origin of Financial Crises). On the other hand, when it comes to their proposed remedy for this instability I find myself disagreeing with both the details of their proposed solution and its objectives....

Applying Minsky's analysis to the Positive Money proposal. Cooper is also concerned that the monetary authority proposed would result in a command economy.

Monetary Reform – Be Careful what you aim for

George Cooper