…this is a game changer (via left foot forward): the Bundesbank finally understands. Economic policies aimed at financial deregulation, low wages and asset price increases instead of low unemployment, high employment and high income have failed."Finally understands," or getting cold feet at the carnage and prospect of dire potential social and political outcomes.
Maybe it will come to be called "the Piketty Effect."
Real-World Economics Review Blog
Bundesbank calls for higher wages across Eurozone
Merijn Knibbe
But see Bill Mitchell, No fundamental shift of policy at the Bundesbank
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ReplyDeleteThat’s a pretty half baked suggestion from the Bundesbank (assuming the summary of the Bundesbank’s views by Real World Economics is correct). If every employer increases employees’ pay, chances are that employers will want a bit of the action, so they’ll increase profits. The main effect, if not the only effect is more inflation.
ReplyDeleteNo sorry: it’s worse than that: the inflation reduces the real value of private sector net financial assets, which would cut demand in real terms.
The best way to increase demand is the way that most MMTers advocate, which is simply to create fiat and spend it, and/or cut taxes.