Friday, June 29, 2012

Mike Sax — Fiscal vs. Monetary Policy: Scott Fullwiler vs. Lars Christensen

This is the essence of it: 
In any case following Fullwiler here we get a working distinction between fiscal and monetary policy that's easy to follow. Fiscal [policy] increases the net worth of the non-government sector [by increasing non-govt net financial assets  through deficits]; monetary policy increases liquidity [reserve quantity] through asset swaps [that change the composition of assets but do not affect net financial assets of non-govt]. In the liquidity trap this breaks down as you have perfect substitutes being swapped-money and bonds.
Read it at Diary of a Republican Hater
Fiscal vs. Monetary Policy: Scott Fullwiler vs. Lars Christensen
by Mike Sax


paul meli said...

Is this a follow-up to the monster thread?…

Seems like one of the participants doesn't know/understand this.

Tom Hickey said...

@ paul

Lars Christensen is not an Austrian (he's Danish) :)

He is an economist at Danske Bank.

Christensen coined the term "market monetarism."

So it is related but not the same issue.

JP Koning said...

Why the disrespectful hack job? Lars is definitely not a nut. Furthermore, he comes from the Laidler school of thinking that money must be taken seriously. You obviously haven't taken the time to understand where he comes from.

Tom Hickey said...

@ JP Koning

OK, I agree that it's over the top. I apologize for getting overly flippant, and will take that down.

Unknown said...

You can read comparison of monetary policy and fiscal policy in Ed Butowsky post, "Obama Chose Monetary Policy - And You're Feeling It"