Tuesday, September 17, 2019

Bill Mitchell — ECB confirms monetary policy has run its course – Part 1

I will have little time to publish blog posts in the next two weeks. But as I travel around I have to sit in trains, planes and cars and that is when I tend to write when I am away from my desk(s). Today, I am in Maastricht – after travelling by train from Paris. I have two events – one on framing and language and the other on Reclaiming the State and Modern Monetary Theory (MMT) basics. Then I am heading to Berlin for a talk at PIMCO and on Friday I am presenting an MMT workshop at the European Central Bank. Last week, the ECB made its next move, the last one for current President Mario Draghi. It will also lock in Madame Lagarde for a time and represents a rather overt statement about the failure of mainstream macroeconomics. While the mechanics of their various policy decisions are interesting and are worth discussing (albeit briefly) the overall optics were more powerful. The ECB has now joined a host of central bankers around the world in, more or less, admitting that monetary policy has run its course and is being pushed into ever more desperate configurations. At the same time, the corollary is that fiscal policy makers are failing in their responsibility to use policy to avoid stagnation and elevated levels of unemployment. Despite rather significant monetary policy gymnastics, aimed at stimulating economic growth and lifting inflation rates, central bankers have largely failed. They have failed because they are wedded to mainstream theory. Fiscal policy makers are constrained by an austerity-biased ideology and/or voluntary institutional machinery that has been created to stifle fiscal initiative (destructive fiscal rules). The cracks are widening. We are approaching the period of fiscal policy dominance – finally! This is Part 1 of a two-part series on this topic. Part 2 will follow tomorrow....
Let's hope it does take another great depression to learn the lesson, like it did last time.

Interesting that Bill will talking to the ECB. Who woulda thunk it even a short time ago. Seems like the last mile is closing.

Bill Mitchell – billy blog
ECB confirms monetary policy has run its course – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

4 comments:

Andrew Anderson said...

Seems like the last mile is closing. Tom Hickey

Don't think so since there still remains the problem of government-privileged usury cartels competing for real resources with fiscal spending for the general welfare.

Yes, monetary sovereigns can (in theory) always outbid the banks but at the cost of using up precious politically acceptable price inflation space.

Matt Franko said...

“ to learn the lesson,”

LOL obviously no lesson was ever learned...


sths said...

Since we can't seem to comment on Matt's posts anymore.
I think this NYT article below shows the confusion caused by what was talked about in this post

https://mikenormaneconomics.blogspot.com/2019/09/reserves-collapse.html

https://www.nytimes.com/2019/09/16/business/repo-markets-rates.html

Matt Franko said...

Yeah nice article at the new York crimes.... demonstrates perfectly how trained platonists can never figure anything out...