Tuesday, November 27, 2018

Bill Mitchell — The ‘fiscal contraction expansion’ lie lives on – now playing in Italy – Part 2

This is the second and final part in my discussion about the latest attempts by the IMF and notable New Keynesian macroeconomists to keep the ‘fiscal contraction expansion’ lie alive. The crisis in Italy is once again giving these characters a ‘playing field’ to rehearse their destructive ideas that rose to prominence during the worst days of the GFC, when the European Commission and the IMF (along with the OECD and other groups) touted the idea of ‘growth friendly’ austerity. Nations were told that if they savagely cut public spending their economies would grow because interest rates would be lower and private investment would more than fill the gap left by the spending cuts. History tells us that the application of this nonsense caused devastation throughout, with Greece being the showcase nation. The damage and carnage left by the application of these mainstream New Keynesian ideas are still reverberating in elevated unemployment rates, high poverty rates, broken communities and increased suicide rates, to name a few of the pathologies it engendered. In their article – The Italian Budget: A Case of Contractionary Fiscal Expansion? – Olivier Blanchard and Jeromin Zettlemeyer, from the Peter Peterson Institute for International Economics continue to argue the case for austerity in Italy as the only way to engender growth. In this second part of my analysis of their argument I show that there is little evidential basis for concluding that Italy is a special case. I argue that imposing fiscal austerity on Italy will turn out badly. The broader conclusion is that the mainstream economics profession has learned very little from the GFC. For them the story stays the same. It is one that we should reject in every circle it arises.
Bill Mitchell – billy blog
The ‘fiscal contraction expansion’ lie lives on – now playing in Italy – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

1 comment:

Matt Franko said...

Heres Bills from today:

"And that serves as background to Phillip Inman’s Guardian surrender article. His thesis is simple:

6. “Today, most countries in the developed world have ageing populations and are rapidly running out of money to cope.

So think about Point 6 – “most countries … are rapidly running out of money to cope”.

That is a plain lie."

OK so Bill thinks this is a "neo-liberal conspiracy!" where this Art Degree Journo guy is "lying" (bearing false witness) for political propaganda purposes or wtf...

The Art Degree non-Science Journo guy has a cognitive deficiency and is reifying/objectifying what is properly seen as an abstraction of Accounting science and thinks "money!" (figurative language; which ofc the journo cannot interpret) can be "run out!"...

This is the problem... too many people not qualified out there who somehow still think they should be allowed to make serious input into matters of economic policy... or worse think they should be allowed to occupy positions of authority in govt economic policy.... not ideal...