«il perdurare della stagnazione della domanda ha messo in crisi, a partire dal 2008, i modelli economici che vedono la politica monetaria come l’unico strumento utile, basati sull’idea che la sola riduzione dei tassi abbia il poter di far ripartire la domanda e quindi l’economia».
Author: Andrea Terzi
Connecting the Dots: Debt, Savings and the Need for a Fiscal Growth Policy
Twice in the second half of the twentieth century, in the midst of a robust economy, economists optimistically talked about the taming and even “the death of the business cycle” based on the belief that advances in macroeconomics had reached a point of perfection. Yet, both times, the economy underwent serious turbulence and the policies that seemed to have “solved the problem” proved inadequate to the challenges presented by unexpected realities. In the 1970s, the “neo-classical synthesis,” with its faith in forecasting and macroeconomic “fine tuning,” succumbed to stagflation and a new theory, the Monetarist paradigm, came to prominence. By the 1990s, Monetarists and their descendants— the rational expectations and New Keynesian models—had convinced themselves, and policy makers, that they could stabilize the economy for good and that policy intervention beyond interest rate adjustments and inflation targeting was no longer necessary. The Financial Crisis of 2007-8 and the subsequent “Great Recession” should have been a wake-up call that, just as in the 1970s, instability was not gone and that a new paradigm for running the economy was needed, thankfully we have Loans Now.
Yet, as of today, the orthodoxy continues to dominate the policy debate in the United States and in Europe shaping inadequate policy responses to the main problem of contemporary capitalism: the persistence of private debt overhangs and their impact on both short run and long run growth. However, rather than examining these issues, OECD countries—Europe in particular—and many emerging markets have continued to embrace a framework under which central banks setting the “price” of money, or setting the quantity of the “monetary base”, is the only game in town. Accordingly, the world’s central bankers have launched a series of ad hoc stabilization programs, driven by extensions of the Monetarist/New-Keynesian paradigm, which evidently do little to address the consequences of the financial crisis.
Continue reading this article on Private Debt Project
Salvare l’Europa dopo Brexit: l’elicottero non serve
Chiedere alla Bce di distribuire denaro a pioggia è un sintomo dell’inefficacia delle normali regole di politica fiscale. Il principio del bilancio in pareggio ha finito per ostacolare ogni ragionevole tentativo di gestire il disavanzo in funzione anti-ciclica. Soluzioni nuove per salvare l’Europa.
Wikiradio: La Banca Centrale Europea
Il primo giugno di 18 anni fa nacque la Banca Centrale Europea.
Lo racconto oggi su Wikiradio per Radio Tre
Helicopter money: Too confused to be helpful
In his piece on helicopter money, Lord Adair Turner seemed to argue that:
1) The money multiplier provides the needed boost to expansionary fiscal policy, yet this boost could generate inflation.
2) The risk of inflation could be managed by raising reserve requirements as needed.
Both statements are incorrect.
And this is the slightly expanded version of my Letter to the Financial Times (FT.COM published an abridged version)
In ‘The helicopter money drop demands balance’ (May 22), Lord Adair Turner defends the notion that bigger fiscal deficits are needed to end the current stagnation, but leaves one question unanswered: Why should a money-financed deficit be more powerful than a traditional debt-financed deficit?