Monday, 9 September 2019

Crass Project Syndicate article by Roger Farmer.

First, he claims the coexistence of low unemployment and low inflation disproves the conventional idea that the two are inversely related. (Article title: Central Banking's Bankrupt Narrative.)

No it doesn’t and for the simple reason that advocates of the latter relationship never said it stays constant thru time: i.e. the inflation / unemployment relationship can deteriorate OR IMPROVE – indeed, it would be surprising if it did stay absolutely constant thru time. Doh!

Second, he claims that if an interest rate hike were accompanied by his own bizarre idea that governments should hand out money to those who invest in the stock market, the net effect might not be the normal “higher interest rates damp demand” relationship. Well you don’t say!!

Apart from the dubious morality of handing taxpayers’ money to the rich, if an interest rate hike is accompanied by fiscal stimulus of any sort, it’s pretty stark staring obvious that the NET EFFECT can be stimulatory!!

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