Rather, I think he made a PERSONAL economic decision that telling the politicians what they wanted to hear and wrapping it in high-falutin’ economist-talk would be beneficial to HIS OWN economy, and the harmful consequences could be delayed long enough that he wouldn’t suffer them.
Yes, a distinct possibility but… “Never attribute to malice that which is adequately explained by stupidity.” – Hanlon’s razor
The Captain
I agree with almost everything you wrote, the part I don’t grok is what Keynes has to do with it. The founding assets of the oldest central bank, the Bank of England were not physical assets. It was a loan:
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As stated in the article, the money from the loan was then loaned to others. In colloquial terms, the Bank of England began printing money out of thin air. This continued from 1694 until the present day.
I think I now understand your question. All Lord Keynes did was to legitimize the fraud as proper government economic policy with the caveat that it should be rolled back via taxation once the crisis was resolved.
Note that the main practical difference between Central banks and commercial banks is the amount of reserves required for fractional reserve banking. Central banks ZERO.
A second difference is that commercial banks can require their clients to pay back the loans.
The third difference is that Central banks are allowed to print official tokens to be used as legal tender currency.
The Captain
If printing money is such a panacea then the USA should be an economic paradise by now.
It’s closer to “paradise” than most other countries. The USA is the single most desired place for people who care mostly about their economics to choose as their destination when changing countries.
Printing money works until it doesn’t.
The question is, what would make it stop working?
A more dominant reserve currency would do it, I suppose.
It’s closer to “paradise” than most other countries. The USA is the single most desired place for people who care mostly about their economics to choose as their destination when changing countries.
add to that the fretting about the reserve currency a week ago was completely misplaced. The USD is way out in front of the EUR and Yen as the reserve currency. In many countries it is the main currency.Printing money works until it doesn’t.
The question is, what would make it stop working?
A more dominant reserve currency would do it, I suppose.
The British pound lost it’s dominance as a reserve currency and they’ve continued printing money with no problems. Been doing it for over 300 years now …
Where countries get in trouble is if they have massive debt denominated in currencies they don’t control (or if their currency is pegged to another currency). As long as the US, the UK, or other country with an independent currency issues bonds denominated in that currency, then they can’t be crushed by that debt the way a country like Greece could, which had localized inflation but its currency and debt was in the Euro which it had no control over, and which wasn’t inflating to speak of at all. Once the European Union stepped in and effectively backed Greece’s finances as necessary, the disastrous situation evaporated. A fully independent country/currency would have never been in that situation in the first place.
Of course if the US were to go completely bonkers on deficit spending, unrestrained money printing, etc … indefinitely there would eventually be serious problems with inflation, like we had in the 1970s. But, we have responsible adults in charge, at least at the moment, and they are taking appropriate steps to rein in debt through raising interest rates and reversing the quantitative easing of bond purchases.
I wrote: we have responsible adults in charge…and they are taking appropriate steps to rein in debt through raising interest rates and reversing the quantitative easing of bond purchases.
I should have added that the responsible adults running things at the moment have already drastically reduced fiscal stimulation of the economy compared to last year when we had checks going out to every household, enhanced and very generous unemployment benefits, boosted child tax credits, and more.
The International Finance Corporation (IFC), the World Bank’s investment arm, said it will provide Sri Lanka a $400 million cross-currency swap facility to help fund essential imports.
Three private banks, which together deal with over 30 per cent of Sri Lanka’s remittances and exports, will receive the facility to fund essential imports, including medicine, food and fertilizer…
DB2
The truth is the same people that brought us the debt, the supply side ejits, also brought us low growth. The GDP is undersized by a considerable amount. That is why the debt seems so large.
With an industrial policy now in place the debt to GDP ratio will decline.
Stop believing in supply side econ that was entirely lies.