tag:blogger.com,1999:blog-6335146197342151188.post2402349922139562567..comments2024-02-29T13:07:00.519+00:00Comments on Development Horizons by Lawrence Haddad: Ben Bernanke and Elvis CostelloLawrence Haddadhttp://www.blogger.com/profile/17265061444076801962noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6335146197342151188.post-26281044122582119902012-03-23T10:42:20.730+00:002012-03-23T10:42:20.730+00:00Lawrence:
By 2050 the debates between so-called n...Lawrence:<br /><br />By 2050 the debates between so-called neo-Keynesians (fiscal counter-cyclists) and pseudo-neo-monetarists (monetary counter-cyclists - the opposite of Friedman's rules, of course) will seem trivial. The main change between 1929-31 response and 2007-9 response is that this time almost everyone agreed that the public stance had to be massively reflationary. The balance between fiscal and monetary is a secondary issue, though important. In 1929-31+ the standard view was: do nothing; let markets sort it out; assets have a floor price (true enough ...). Almost nobody says that this time, except Ron Paul and a few Tea Party nuts. So we have the highest LEVEL of OECD public-sector deficits, relative to GDP, ever in "peacetime" (though by historic standards not very high public-debt/GDP ratios in most OECD countries) ... and, absent animal spirits, Euro-America's GDP roughly stagnates, instead of continuing to fall as it did last time.<br /><br />European Central Bank indeed talks much tougher than the Fed but in practice also accepts "dual mandate to keep prices stable and to promote full employment" and, like our own dear BoE, does massive QE too - and advertises it as potentially unlimited. The central banks' STANCE is right, but its RATES cause moral hazard: they should be lenders of last resort to banks at penal rates, not givers-away of first resort at rates that just re-fatten the commercial banks, and stimulate them - in due course - to do more Floridas, Haughey loans, CDO-squareds, South Sea Bubbles, or whatever it is when "next time is different". <br /><br />That's medium-term. For now, QE (= what we once called "open-market operations" on a vast scale) pushes a piece of string as few wish to borrow and invest. But such pushing stops the pushed object sliding back. Unfortunately, competitive deficit reduction by EU governments meanwhile does push it back, by forgetting the other lesson of the 1930s: don't beggar thy neighbour. <br /><br />best wishes<br /><br />MichaelMichael Liptonnoreply@blogger.comtag:blogger.com,1999:blog-6335146197342151188.post-79051993383034449682012-03-23T07:37:13.098+00:002012-03-23T07:37:13.098+00:00After that praise you must surely now arrange for ...After that praise you must surely now arrange for those handouts to be scanned and posted online for all to learn from...Sam Roberts (Ghostsigns)https://www.blogger.com/profile/04388533305466789541noreply@blogger.com