Thursday, 18 January 2018

You’ll get a job at a central bank – if you’re seriously stupid.

This article in the Wall Street Journal is a laugh. It’s by Neel Kashkari (president and CEO of the Federal Reserve Bank of Minneapolis and participant in the Federal Open Market Committee.) Article title: “Immigration Is Practically a Free Lunch for America.”

He argues, first, that immigration raises GDP (as distinct from GDP per head). Well that’s pretty obvious: the more people there are in a country, the larger will its GDP be all else equal. In fact even if all else is not equal (e.g. if immigrants are all unproductive, lay-abouts) GDP will STILL RISE. As long as a bunch of immigrants produce at least SOMETHING, however little, then the effect of their arrival will be to raise GDP.

Kashkari then says “Legislators of both parties, policy makers and families all want faster economic growth because it produces more resources to fund national priorities and raise living standards.” He doesn’t tell us what “national priorities” are, but I assume he’s referring to infrastructure, schools, hospitals, etc.

Now assuming you have more brain than Kashkari, you ought to have spotted the flaw there: it’s that the larger the population, the more infrastructure, schools etc are needed!! Thus immigrants have no effect whatever on a country’s ability to afford those items unless the effect of immigration is to raise GDP per head. But Kashkari doesn’t address the question as to whether immigrants increase GDP per head!

Kashkari also trotts out the old canard about stimulus not being possible without increasing the national debt (3rd para). In fact as Keynes pointed out almost 100 years ago, stimulus can be funded either by more debt or by new money created by the central bank. Indeed that’s exactly what numerous countries have done over the last five years or so. That is, their governments have borrowed and spent more, with their central banks then printing money and buying back almost all that new debt. The net effect of that is: “the state prints money and spends it and/or cuts taxes”. Seems Kashkari is not aware of what has been going on. Evidently studying economics is not a requirement when seeking a nice well paid job at the Fed.

Why do I have to waste my time combating this nonsense?


  1. Because nobody else does it.

    1. Actually I just looked at the first ten comments after the article, and they're as scathing as my above article. Tee hee....:-)


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