By Dan Kervick
New Economics Perspectives is an economics blog, not a political one. So in the past, while I have written freely about some political issues, I have avoided the partisan political wrangle. Continue reading
By Dan Kervick
New Economics Perspectives is an economics blog, not a political one. So in the past, while I have written freely about some political issues, I have avoided the partisan political wrangle. Continue reading
By Dan Kervick
The Fed did something on Wednesday: it announced a new program of open-ended quantitative easing, and it announced that it likely won’t pull back on the new round of monthly asset purchases once the economy begins to recover more strongly, but will keep the purchases going for some indefinite period of time afterward. After what exactly was left unsaid. The Fed apparently has a target it intends to overshoot, but hasn’t said exactly what the target is. But whatever it is, we have been given forward guidance that the reaching of that unspecified target won’t stop the asset purchases – at least not right away.
By Dan Kervick
An important anniversary is approaching. On January 1, 1863, Abraham Lincoln signed and issued the Emancipation Proclamation. The proclamation that sounded the final end of the depraved institution of American slavery was presented to the nation and the world as an emergency war act, a “fit and necessary” measure for suppressing an armed rebellion against the authority and government of the United States. The language of the Emancipation Proclamation is restrained by the customary legalisms of government writ; and yet, vibrating through and beyond the tight cords of executive propriety, the drama and permanence of Lincoln’s statement sound clearly, along with the solemn national commitment to sustain the liberation of the newly freed men and women by force of arms:
And by virtue of the power, and for the purpose aforesaid, I do order and declare that all persons held as slaves within said designated States, and parts of States, are, and henceforward shall be free; and that the Executive government of the United States, including the military and naval authorities thereof, will recognize and maintain the freedom of said persons.
By Dan Kervick
Matt Yglesias beats a dead monetarist horse – the same defunct nag whose flogged and forlorn carcass should have been cremated years ago – by again seeming to pin the chief responsibility for attacking unemployment on the Fed, and on its supposed control over inflation and inflation expectations. And yet as is often the case with Yglesias, the elected political leaders of the most economically powerful nation in the world rate no mention in his post, despite their scandalous and incompetent failure to address a national employment debacle.
By Dan Kervick
The politicians always seem to be the last people to get it. But anyone who actually works in the corporate world knows that the central economic concern these days, the thing that is holding us all back economically, is not uncertainty about tax rates. They also know the core problem is not frustration with regulation and red tape. Nor is the problem an epidemic of nocturnal terrors about government deficits. The problem is this: not enough customers. And the problem of not enough customers right now is exacerbated by the fact that there is also low confidence that there will be more customers in the foreseeable future. With low confidence that broad prosperity will return to customers, the willingness to invest and hire aggressively is limited. And since so many businesses perceive the world the same way, the combined effect of their general unwillingness to hire is persistent high unemployment, and a self-reinforcing perpetuation of the low demand that is the cause of the unwillingness to hire in the first place.
Posted in Dan Kervick, MMT, Modern Monetary Theory
By Dan Kervick
Nick Rowe recently argued that there can be certain types of products for which the market might allow multiple equilibria. This can happen because the willingness of an individual to buy some product might depend on how many other people buy that product. The upshot, Rowe suggests, is an unusual, non-functional shape to the demand curve characterizing the market for the product in question, resulting in two distinct equilibrium demand quantities corresponding to the same price.
Posted in Dan Kervick, MMT, Modern Monetary Theory
By Dan Kervick
According to their website, the Alternative Banking Working Group is “a group of concerned citizens, activists, and financial professionals with two goals: the first is to explore and, if possible, establish alternative banking systems that might replace the current system. The second goal is to broadly understand and educate people about the current financial system, as well as come up with short and long term plans to improve it.”
Posted in Dan Kervick, Modern Monetary Theory
By Dan Kervick
One staple of economic policy debate is the running conflict between those who lean toward a reliance on fiscal policy and those who lean toward a reliance on monetary policy. Continue reading
Posted in Dan Kervick, MMT, Modern Monetary Theory, Monetary policy
By Dan Kervick
Imagine a world and a society in which 500 people own everything – absolutely everything. These blessed few live in the Citadel, a mighty bastion of comfort with fortified and impregnable walls. The walls surround the Citadelians’ collections of lavish homes, spacious and opulent gardens, gorgeous pleasure arenas, and well-outfitted factories and workhouses.
Yes, factories and workhouses. These mighty 500 pay 100,000 other people to do various kinds of work for them. The work consists in transforming some of the resources and goods belonging to the 500 owners into a variety of consumable products, and also in using some of those products along with other raw materials to perform sundry services for the 500, services that include the production of splendid works of art and intellect.
The labors of the 100,000 workers yield more delights than can possibly be enjoyed by the 500 owners as the latter live out their luxurious but all-too-finite lives. The result is that the 500 owners in the Citadel are absolutely sated. They have no need to hire any other people to do any additional work. They already possess riches beyond the limits of enjoyment and desire.
Posted in Dan Kervick, Unemployment
By Dan Kervick
Matt Yglesias has described three popular contemporary political approaches to the challenge of maintaining our national commitment to “providing health care services to the elderly, the disabled, and the poor and also to bolstering the general incomes of elderly people.” One is Congressman Paul Ryan’s approach of reducing the level of the future commitment in order to bring it in line with “historic norms about the level of taxation.” The second is the liberal approach of preserving our existing level of commitment into the future, even if that means raising taxes in the aggregate. The third is “the hazy Obama/Simpson-Bowlesish center that wants to raise taxes and cut programs.”
Perhaps this short list characterizes the main political answers reasonably well, if the main political question is how to tame the budget, and shrink or control the deficit. But I would like to point out that all three answers have something in common: Not a single one of these approaches, as usually presented, contains any call for the national government to engage seriously in what one might call “investing in our future”. All three of them reflect the defeatist mindsets of different camps of worn out oldsters, each promoting a different way of giving up, making do, or just hanging on. They are all pathologies of the dismal “No, we can’t!” era in which we now live.
The promoters of these three variations on the theme of austere, hard news pessimism no doubt fancy themselves realists and responsible grownups. But they are nothing of the sort. They are burned-out casualties of neoliberalism, afflicted with dead imaginations or ideological blinders, who have forgotten what it means to grow a country and build a society. We need to move beyond their miserable and dismal trilemma. If the die-hard adherents of these schools of thought want to mope around the shuffleboard courts at the End of History Home for Final Surrender, let them. But it’s time for the rest of us to reject all three approaches and reignite our history.
Posted in Dan Kervick
Tagged Matt Yglesias, MMT, Modern Monetary Theory, Waren Mosler, William Black