(Sir) Michael White on economics

No, not really Sir Michael:

Politicians and pundits who confidently predict the likelihood of a double-dip recession are bluffing. No one knows for certain, let alone where or why. After all, economists are still squabbling over the Wall Street crash of 1929 turning into the protracted Great Depression in 1931 after markets had appeared to be recovering.

But today\’s economic news – good and bad – reminded voters that Britain\’s political parties already have rival narratives in place to explain what happens next. China booms and German imports rise (good), the US falters (bad). UK unemployment dips (good), but so do Bank of England growth predictions (bad). Monetarists v Keynesians, just like the 30s.

This is using monetarist to mean \”peeps I don\’t like\”…the State Slashers.

You\’ll actually find at present that the monetarists, the likes of Tim Congdon et al, are even more worried than the Keynesians. For the monetarists have all read Freidman and Schwartz and conclude that the Depression was caused by the money supply being too tight….the flip side of saying that inflation is caused by too much money is that deflation is caused by too little….and that thus there should be, most certainly by the ECB and possibly by the BoE, a great deal more monetary expansion. Lots of QE for example.

Which rather changes that moetarists v Keynsians debate. Certainly as far as the euro is concerned, it\’s the monetarists who are screaming blue bloody murder about how the authorities are screwing up. and they do have a certain amount of logic on their side….for the ECB really does seem to be doing just what the Fed was doing in hte early 30s and that didn\’t work out all that well really.

3 thoughts on “(Sir) Michael White on economics”

  1. Price level targetting would be nice. QE on its own without a target (i.e. that is expected to be temporary) won’t have much effect.

    Keynesians today like Krugman only really got behind fiscal stimulus (other than automatic stablisers) when short term interest rates hit zero. New Keynesians always seem to have more in common with monetarists than vulgar keynesians of the post war erea anyway.

    With the Fed/ECB/BoE refusing to be more proactive in unconventional ways, what else can boost AD? Fiscal tightening, pah we are not Canada in the mid-90s and the world is not the world of the mid-90s.

  2. QE doesn’t expand the money supply. QE expands the *base money* supply. Everything else is out of the authorities’ hands.

  3. Michael White is conflating the Wall Street crash with the Great Depression. The only connection is they were close together. Bad policy created the Great Depression not the Wall Street crash.

    No one can ever know the future for certain so he is raising the bar too high. The best guide to the future is the bond market where everything is priced in and that does not look good. With yields in the UK, core Europe and US at historic lows. The message is clear whatever growth there is will be anaemic.

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