tag:blogger.com,1999:blog-7342528022617501525.post7358581778050613417..comments2024-03-28T15:05:33.781+13:00Comments on Economics New Zealand: And now for something completely different...Donal Curtinhttp://www.blogger.com/profile/03687495556590450225noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-7342528022617501525.post-76105042907470128362016-09-25T11:38:11.643+13:002016-09-25T11:38:11.643+13:00Thanks Tim for the comment. I agree with your comm...Thanks Tim for the comment. I agree with your comment about spare capacity. As you say, modest (or even occasionally quite large) fiscal and monetary boosts when the economy is below full capacity will often have positive effects. Ann couldn't cover everything in 45 minutes, so I don't know for sure how much monetary/fiscal boost she had in mind but I got the impression that it was rather substantial: she said, for example, that Japan's government debt was in excess of 200% of GDP, but (she said) so what? At those sorts of levels, however, you're getting near the end of the penny section.<br /><br />Bit more inflation? Wouldn't hurt, especially in current circumstances, but again there are limits. You can't fool all of the people all of the time: if you keep on eroding the value of debt with a bit of unexpectedly higher inflation, sooner or later debt holders cotton on, and either stop providing it or ask a steeper price.Donal Curtinhttps://www.blogger.com/profile/03687495556590450225noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-6328039215133662632016-09-21T13:04:28.464+12:002016-09-21T13:04:28.464+12:00It all depends on whether there is spare productiv...It all depends on whether there is spare productive capacity in the economy. As long as there is under-employment there is no reason to expect high inflation to result from monetary finance directed to public spending or simply distributed to consumers. Besides, we need a little more inflation if only to ease the massive burden of debt, both private and public.<br />Also the injection of effectively debt-free money can be calibrated, starting moderately. If you need convincing from a source credible to those in the financial world I recommend the work and presentations of Lord Adair Turner. There are plenty of historical examples of successful direct money finance including by the first NZ Labour Govt for building state houses, dams and stabilization of dairy prices. timhttps://www.blogger.com/profile/13024573891623118487noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-14734698099898828482016-09-21T12:34:15.930+12:002016-09-21T12:34:15.930+12:00There's something certainly missing there: it&...There's something certainly missing there: it's implausible that you can have completely open-ended QE without something giving way Donal Curtinhttps://www.blogger.com/profile/03687495556590450225noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-58202155658823345402016-09-21T12:30:12.940+12:002016-09-21T12:30:12.940+12:00Thanks Jim, looks interesting: it's in my in-t...Thanks Jim, looks interesting: it's in my in-tray and I'll have a read when I have half a sec.Donal Curtinhttps://www.blogger.com/profile/03687495556590450225noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-50359641726007840002016-09-21T12:29:22.202+12:002016-09-21T12:29:22.202+12:00I agree, one of the things that bothered me too wa...I agree, one of the things that bothered me too was the absence of some sort of interest-rate setting marketplace.<br />Mind you, she only had 45 minutes to cover a lot of ground (and I've only space to cover some of what she did say) so we didn't see the full shape of how she sees the economy working. <br />One thing I left out, which may interest you, is that she couldn't see any point to the RBNZ's 'core funding' controls, but was warmer about macro-pru. I got the impression, from her answer to one question, that macro-pru was good because it potentially defused the asset bubbles she sees banks responsible for, but also because it slotted into a wider picture of central direction of credit.<br />The thing that concerned me most, though, as I mentioned, is that she seemed to see no finite limits to the expansion of the government's/central bank's/commercial banks' balance sheets. For someone who's got quite a lot of experience in dealing with sovereign debt, that seemed well off beam to me.Donal Curtinhttps://www.blogger.com/profile/03687495556590450225noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-15792123539212006022016-09-21T11:28:47.958+12:002016-09-21T11:28:47.958+12:00see https://www.richmondfed.org/~/media/richmondfe...see https://www.richmondfed.org/~/media/richmondfedorg/publications/research/annual_report/1998/pdf/article.pdfJim Rosehttps://www.blogger.com/profile/02233668500637892711noreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-4772537033453398482016-09-21T09:58:28.698+12:002016-09-21T09:58:28.698+12:00I'm sorry I missed Pettifor's events, but ...I'm sorry I missed Pettifor's events, but from your account it seems that she doesn't adequately reconcile the real and financial sides of the economy. Yes, "banks" can "create" credit more or less without limit, if they can persuade someone to hold the deposits thus created, but so what? If I buy your house for $10m, on credit, you are probably better off and I'm probably worse off (thinking in terms of lifetime consumption possibilities) but aggregate real consumption/investment hasn't changed. It is the pressure on real resources - desired saving vs desired investment - that is reconciled by the changes in interest rates (in a world with or without central banks). Michael Reddellnoreply@blogger.comtag:blogger.com,1999:blog-7342528022617501525.post-83039848755797852372016-09-20T16:35:25.192+12:002016-09-20T16:35:25.192+12:00I think she needs to work Gresham's Law somewh...I think she needs to work Gresham's Law somewhere into her analysis.Rosshttps://www.blogger.com/profile/03848572423110240185noreply@blogger.com