tag:blogger.com,1999:blog-2277215496195926573.post3391656695474822745..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Peoples’ QE and mistakes by the chattering classes.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2277215496195926573.post-4435883966868270252015-08-08T05:40:38.325-07:002015-08-08T05:40:38.325-07:00Hi KK,
Re your first point, I agree that how infl...Hi KK,<br /><br />Re your first point, I agree that how inflation is traded off against unemployment is a partially political question, but politicians have had their say on that, and what they’ve said is, “the Bank of England will aim for 2% inflation, though it will have leeway to go above and below that target when it thinks appropriate”. Thus politicians would contradict themselves if when inflation rises in year or two’s time that all of a sudden and on political grounds the UK will aim for 4% inflation. <br /><br />Re my claim that "the CB has the final say on the size of stimulus packages", I’m sticking to that claim. Reason is that politicians in the UK, US and elsewhere have quite clearly and explicitly given CBs that “final say”. Politicians DON’T HAVE TO give CBs that power or independence because ultimately power always lies with politicians. But the fact is that politicians have given CBs the ultimate responsibility for controlling inflation.<br /> <br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-26984946512238774892015-08-08T03:38:47.476-07:002015-08-08T03:38:47.476-07:00Ralphonomics is by far the best and most vigorous ...Ralphonomics is by far the best and most vigorous blog in favour of Full Reserve Banking. Unfortunately the peculiar ideas of Positive Money sometimes intrude.<br />However, I do appreciate that Ralphonomics is not an official mouthpiece for Positive Money.<br /><br />Regarding your response to my comment, let me make two points:<br />1. Approaching full employment there is likely be a trade-off between more deficit stimulus and the risk of inflationary pressures.<br />This choice is far from being " PURELY TECHNICAL" as you claim.<br />Judgements regarding the risks and consequences of inflation versus the risks and miseries of unemployment are partly political matters, which are far well outside the competence of Central Bank economists .<br /><br />2. You misunderstand the existing relationships between the CB and Government in the UK and elsewhere. <br />It is wildly incorrect to say "the CB has the final say on the size of stimulus packages".<br />See Bill Mitchell: "The sham of central bank independence" http://bilbo.economicoutlook.net/blog/?p=29770<br />KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-45793796151007416342015-08-07T23:07:54.660-07:002015-08-07T23:07:54.660-07:00Re full reserve, PM are very open about the fact t...Re full reserve, PM are very open about the fact that that idea was first thought up decades ago. As to whether PM literature refers to Keynes’s advocacy of “print and spend” in the 1930s, I’m not so sure.<br /><br />Re your claim that the deficit is partially a political issue, what are your reasons? The sole purpose of the deficit is to impart stimulus, and the question as to what the right amount of stimulus is, is PURELY TECHNICAL, far as I can see. That is why under both the existing system, and PM’s system, a central bank committee, or some similar committee of economists has the final say on the size of stimulus packages: that is, under the existing system if the CB thinks the deficit is excessive, it can counter that with an interest rate rise.<br /><br />In contrast, the question as to what proportion of GDP should be take by public spending is an obviously political one, as is the question as to how that total is split between governmnt departments. Under both PM’s system and the existing system, that decision is, quite rightly, in the hands of politicians.<br /><br />Next, you say “And it is unclear why Central Bank "experts" would be more competent than a democratically accountable ministers advised by civil servants.” The answer to that is that if the economics qualifications of the latter “civil servants” and CB experts are of the same standard, then there’s obviously no difference in “competence”. But there is a crucial difference between those two scenarios, namely that in one of them a POLITICIAN has a say on the size of the deficit, and we all know what politicians do with deficits / stimulus just before elections. In effect, that gives politicians access to the printing press, and it is widely accepted that that is dodgy. <br /><br />Finally, you say “the controversy about this PM proposal for an expansion in the powers of the Central Bank detracts from the merits of Full Reserve banking..”. To repeat what I said above, there is no real expansion of CB powers in that under both the existing system and PM’s, the CB has the final say on the size of stimulus packages. All the PM system does in effect is to dispose of a daft element in the existing system, namely that the Treasury has say on stimulus, but that can be overruled by the CB. As I’ve pointed out a dozen times on this blog, having two separate arms of government take the same decision makes as much sense as having a car with two steering wheels.<br /><br />Finally, please note I am not an official spokesperson for PM: indeed I think PM does go wrong on some points.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-26249770644651355952015-08-07T20:25:21.480-07:002015-08-07T20:25:21.480-07:00As you mention, "Keynes said in the 1930s tha...As you mention, "Keynes said in the 1930s that “print and spend” would be a perfectly viable form of stimulus".<br />So Positive Money and Co are merely “Johnny come latelies” in this respect.<br /><br />Proposals for Full Reserve Banking are even older. <br />So again Positive Money and Co are merely “Johnny come latelies” in this respect.<br /><br />The only new idea of PM and Co is their proposal that the budget deficit should be decided by an unelected committee of economic "experts" at the Central Bank.<br />However, the budget deficit is a partly political issue.<br />And it is unclear why Central Bank "experts" would be more competent than a democratically accountable ministers advised by civil servants. <br />Do you have crush on Janet Yellen? Or Alan Greenspan or Ben Bernanke?<br /><br />Even worse, the controversy about this PM proposal for an expansion in the powers of the Central Bank detracts from the merits of Full Reserve banking without PM's Central Bank committee.<br />So it seems that Positive Money is one of the “Johnny come latelies” who are making a mess of it .KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.com