Wednesday, May 20, 2020

Poetic truths from a leading economist: 'from crisis stems great renewal' — James Nason

In a keynote address to the Alltech One virtual global conference last night Australian-time, Mr McWilliams, an internationally renowned speaker and one of the world’s most influential economists, drew from the work of his countryman WB Yeats to illustrate how previous periods of crisis have historically led to great renewal.

“When I worked in the Central Bank in Ireland, if you’d told me that the Federal Reserve was going to buy government bonds directly, was then going to buy corporate bonds directly, and then last Thursday, it says we’re going to buy junk bonds and we’re going to take those off the balance sheets of the banking system and we’re going to give the banking system cash and the banks can lend out that, I would have said, that ‘ain’t going to happen’.
“And the funniest thing is it’s happened in the last two weeks and nobody said a word.
“Why? Because everybody realises that this shift is coming.”
– ‘Modern monetary theory’ gaining momentum: Faced with a choice between abandoning their dogma or moving into another Great Depression, monetary authorities in the United States and Europe were choosing to spend their way out by underwriting incomes and bailing out industries, and electing to worry about potential inflationary consequences in the future.
The US and Europe were in “a sort of a deflationary death spiral” that could potentially “drag us all into a depression” which could go on for a long time if monetary authorities don’t actually step up to the plate. However Mr McWilliams said he believed they are stepping up.
In the United States which has full monetary autonomy and its own currency and is facing a Presidential election later this year, the Democratic side of politics is coalescing around support for modern monetary theory, the notion of printing money to solve a country’s problem (a concept that many traditional economists have issues with).
2020 opened with the expectation the US would experience a presidential election against a backdrop of lowest level of unemployment ever. It will now be held against a backdrop of the highest unemployment ever, currently standing at 28 percent.
“That is the only story” Mr McWilliams said. “Once your unemployment goes to that level, then all bets are off. All ideology’s out the window, and you’ve got to get folk back to work.”
Mr McWilliams said it would be critical for the US under this approach to protect its “productive capacity” to avoid hyperinflation, such as that which beset Germany after World War I and Zimbabwe when productive farming land was taken from farmers under the Mugabe regime.
In order to achieve aim that he said key MMT proponents such as economist Stephanie Kelton, a senior Democratic economic advisor, are promoting the idea of using Government money now to build and expand the capacity of the US economy to reduce the chances of having inflation.
“I would agree with that, simply because I think we’re moving into a deflationary world. If rates of unemployment in certain states are as high as they seem to be ticking up every day, that’s not an environment where prices rise. That’s an environment where prices fall.”
Beef Central (Australia)
Poetic truths from a leading economist: 'from crisis stems great renewal'
James Nason


Andrew Anderson said...

Except fiat creation has to compete with the privately created deposits of a government-privileged usury cartel for real resources.

Yes, a monetary sovereign can always outbid the private sector but at the cost of unnecessary price inflation.

Or is allowing the banks and the so-called "credit worthy" to steal from the poorer price deflationary via productivity gains?

That's the theory but it ignores the externalities inherent in injustice which ultimately could result in some VERY expensive consequences (e.g. France 1793).

Andrew Anderson said...

and we’re going to give the banking system cash and the banks can lend out that,

No, not unless the banks lend out actual physical fiat, coins and paper Central Bank Notes, which they don't normally do.

Instead, the banks create additional liabilities for fiat (bank deposits) when they "lend".

Matt Franko said...


AA everybody here already knows that...