Posts tagged Monetary policy

Re: Prepare Two Envelopes

jackson:

The standard Keynesian line is that stimulus is bad when an economy is at full employment, because any stimulus at that point must lead to inflation or asset bubbles, rather than additional output. But stimulus during a crash is sort of the textbook answer for what the government should try to do.

The “standard Keynsian line” is generally taken to have been either decisively refuted, or else shown to be in need of substantial revision, by the plain fact that a recession and massive monetary inflation coexisted for several years during the 1970s. There are cases where government monetary manipulation can create short-term bubbles in certain assets or industries, but it always comes at the expense (realized either sooner or later) of everyone else outside of those beneficiaries, and there’s no real guarantee that you won’t just end up pushing on a string, anyway.

I realize you’re not a Keynesian, but I’m not clear on what you think the appropriate (short-term) course forward is.

Repeal the government money monopoly, instead of trying to find yet another government scheme to make the world safe for finance capital. That may seem drastic to you, but the fact is that it’s quite easy to do on the margins (just stop prosecuting people who, on their own, decide to establish alternative forms of currency and who set up alternative forms of banking), and in any case anything else is just going to produce more of the same old shit.