[OPE] Martin Wolf goes Keynesian

"The IMF already forecasts consumer price inflation at 2 per cent next year in high income countries. This decline is bad for commodity exporters. But it will promote needed reductions in official interest rates. While the impact of lower rates will be modest, they will still help. Yet, in current conditions, monetary policy will be insufficient. This is a Keynesian situation that requires Keynesian remedies. Budget deficits will end up at levels previously considered unimaginable. So be it." http://www.ft.com/cms/s/0/06241274-9f94-11dd-a3fa-000077b07658.html

In other words, we mortgage the future some more, with deficit financing and fiscal manipulations? The unanswered question is really whether such policies would nowadays provide sufficient incentive to invest in job-creating production, as they did in bygone days. Problem is that the whole financial structure created in the last two decades favours the rentier, not the producer.

But a comprehensive programme of public works is, I suspect, not what Mr Wolf has in mind. It's a pretty sophisticated argument that you could increase aggregate demand, through some kind of redistribution, without any inflationary effects occurring (in fact, with deflation occurring). It's conceivable, but post-Keynesian, really. Post something.

J.
 

_______________________________________________
ope mailing list
ope@lists.csuchico.edu
https://lists.csuchico.edu/mailman/listinfo/ope
Received on Wed Oct 22 17:32:05 2008