Commentaries (some of them cheeky or provocative) on economic topics by Ralph Musgrave. This site is dedicated to Abba Lerner. I disagree with several claims made by Lerner, and made by his intellectual descendants, that is advocates of Modern Monetary Theory (MMT). But I regard MMT on balance as being a breath of fresh air for economics.
Wednesday, 22 June 2016
70 experts (economists) back Remain – whoopee.
They make the bizarre claim in their first paragraph that given a post Brexit recession, government would not be able to deal with it. Reason apparently is that: “With interest rates near zero and debt still high, the Bank of England and Government would have limited ability to prevent such a recession.”
Well the existing near zero rate may well preclude an interest rate cut. But that doesn’t rule out FISCAL stimulus. Ah, you might argue (as indeed the above 70 seem to suggest): but fiscal stimulus drives up the debt, and that’s already too high. But fiscal stimulus doesn’t have to be funded by debt: as Keynes pointed out in the 1930s, it can be funded by new money. Indeed, that’s exactly what we’ve done over the last three years or so: that is, we’ve implemented traditional fiscal stimulus (government borrows money, spends it and gives bonds to those it has borrowed from), and followed that by QE (central bank prints money and buys back the bonds). That all nets out to “the state prints money and spends it”, as suggested by Keynes.
So…have the above 70 economists actually studied economics? Have they heard of Keynes? Have they heard of QE?
Only asking.
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Carney has made £250 million available to the banks....just to tide them over till the dust settles.Quite a bit of dust around at the moment!
ReplyDeleteOh how nice of him. And what rate of interest would they pay? The usual zero percent? Anyway are you sure that shouldn't be billion rather than million?
DeleteSeriously: I'm staggered at the ignorance of the above 70 economist. But I keep asking myself: have I missed something?
Sorry yes make that billion,my error.May as well be £250 triliion,they will keep on making money to keep them banks going.Sky is the limit.
ReplyDeleteMakes you wonder how folk have not said ,"wait a miniute ,we had £250 billion in the kitty?"Give them time.
As to the 70 economist.they obviously never worked at a central bank.It s no harder than typing the numbers into a computer.Though I'd be no good at that job obvioulsy because I would just have missed 3 zeros....whoops