tag:blogger.com,1999:blog-4900303239154048192.post2868026778188388220..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: Osborne-economicsUnknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-4900303239154048192.post-16195096823214663322015-05-11T09:38:04.152-04:002015-05-11T09:38:04.152-04:00Reason - I finally got around to this. I know Sim...Reason - I finally got around to this. I know Simon Wren Lewis and Paul Krugman have been addressing your query. And they have also been very critical of the IMF.ProGrowthLiberalhttps://www.blogger.com/profile/17138489390594441753noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-2593992988888149622015-05-08T03:47:25.982-04:002015-05-08T03:47:25.982-04:00pgl - I really would like to see what you think of...pgl - I really would like to see what you think of think of this. You have a bigger megaphone than I do.reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-4392918059845184322015-05-08T03:45:12.695-04:002015-05-08T03:45:12.695-04:00john,
thanks for the support. Now the second big ...john,<br /> thanks for the support. Now the second big question: Why aren't any mainstream economists (apart from indirectly and incoherently Brad Delong) pushing this line. Why is the (originally IMF pushed I think) line that a tight fiscal, loose monetary policy mix regarded as the way to go? I can only think it depends critically on what I mentioned as an aside assumption that MONETARY policy works MAINLY through the credit channel and less through relative currency prices, is not accepted. I can understand why the IMF dealing with LDCs may have thought this a reasonable assumption, but it is harder to understand why it is taken over without question by those responsible for large developed economies.reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-57882262622148871312015-05-06T14:47:03.397-04:002015-05-06T14:47:03.397-04:00Just to add to "reason"'s point, any...Just to add to "reason"'s point, any wealth effect consumption stimulus from ZIRP and QE induced financial asset inflation is likely to be counterbalanced and even swamped by the contrary need of retirement savers and insurance companies to increase their purchases of over-priced assets to assure sufficient future income flows to meet future contingent liabilities. And, of course, the flattening of yield curves and risk premia, due to the induced shortage of "safe" assets, will result in distorted investment allocations, under-compensated returns-to-risk, and, of course, guaranteed capital accounting losses, once interest rates were to re-normalize.john c. halaszhttps://www.blogger.com/profile/17176419625607679150noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-75733110899961346642015-05-06T09:53:58.025-04:002015-05-06T09:53:58.025-04:00"George Osborne, the Chancellor, has also spo..."George Osborne, the Chancellor, has also spoken in defence of the central bank’s aggressive response to the financial crisis. He has argued that a combination of “tight fiscal policy and loose monetary policy is the right macroeconomic mix” to help rebalance the economy."<br /><br />I've come increasingly to the conclusion that this is 100% wrong. Just look at the implications from the point of view of the typical pension fund. The supply of safe government bonds is going down (tight fiscal policy), but the amount of private debt is going up (loose monetary policy - I'm assuming here that monetary policy will work mainly through the credit channel and less through relative currency prices). The amount of private debt going up will be a combination of investment funding and personal credit, but the net effect must be to push asset prices up and yields down.<br /><br />Now my question - doesn't higher levels of private indebtedness, high asset prices and less safe (government guaranteed) assets imply less financial stability? Doesn't that also mean that relatively small disturbances can push a proportion of the more leveraged population into negative net financial positions (i.e. insolvency)?<br /><br />Now the big question - why is this a good thing?reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.com