"In Keynes’s solution to our global economic problems, the primary function of well organized and orderly financial markets is not to optimally allocate capital. Instead it is to provide liquidity so that holders of financial assets traded on such markets “know” he/she can make a fast exit and liquidate their portfolio position at a price close to the previous market price at any time he/she fears something bad is going to happen in the future. For business firms and households the maintenance of one’s liquid position is of prime importance if bankruptcy is to be avoided. In our world, bankruptcy is the economic equivalent to a walk to the gallows."True, but the important point now is that we are at an Eccles' moment. In other words, monetary policy is like "pushing on a string." We need fiscal policy, and to understand that deficits and debt are not a problem, they are the solution.
Wednesday, June 8, 2011
What is the correct Keynes solution
Subscribe to:
Post Comments (Atom)
The second coming of Trumponomics
Donald Trump will be the first president since Grover Cleveland, also a New Yorker, to have two non consecutive terms in the presidency. The...
-
"Where is Everybody?" The blog will continue here for announcements, messages and links to more substantive pieces. But those will...
-
There are Gold Bugs and there are Bitcoin Bugs. They all oppose fiat money (hate the Fed and other monetary authorities) and follow some s...
-
By Sergio Cesaratto (Guest Blogger) “The fact that individual countries no longer have their own currencies and central banks will put n...
No comments:
Post a Comment