Thursday, 1 June 2017
Positive Money solves the Lawrence Summers and the Steve Keen problem.
Lawrence Summers and Steve Keen have something in common: they have both set out problems that would be solved by having central banks determine the total amount of stimulus, rather than letting politicians have a say in the “total stimulus” question. Positive Money and Bernanke have suggested the latter solution. Details as follows.
Summers’s “secular stagnation”, as he himself says, is a non-problem if politicians implement enough fiscal stimulus. Same for Keen with the debt problem he sets out. As he says in the final paragraph of his book “Can We Avoid Another Financial Crisis”, the consequences of debt deleveraging can be avoided given enough fiscal stimulus.
So…the big problem is the incompetence of politicians. In fact to put it bluntly, having politicians determine stimulus is as ridiculous as putting the snails in your garden in charge of stimulus.
Of course economists are rather a long way from being perfect. But they cannot help being A BIT more clued up than politicians when it comes to ECONOMICS. Ergo it’s better to have the total amount of stimulus (fiscal and monetary) determined by economists, not politicians, as argued by Positive Money.
And (for the umpteenth time) that DOES NOT stop politicians taking legitimate POLITICAL decisions: like what % of GDP goes to public spending and how that is allocated as between defence, education, etc.
Re Bernanke’s advocacy of the above idea, see para starting “A possible arrangement…” halfway down his Fortune article entitled “Here’s How Ben Bernanke’s “Helicopter Money” Plan Might Work.”