The Monetarist Fantasy Is Over
UK Prime Minister Boris Johnson, determined to overcome Treasury resistance to his vast spending ambitions, has ousted Chancellor of the Exchequer Sajid Javid. But Johnson’s latest coup also is indicative of a global shift from monetary to fiscal policy.
In the 1970s came the monetarist counter-revolution, led by Milton Friedman. The only stabilizing that a capitalist market economy needed, Friedman said, was of the price level.
Provided that inflation was controlled by independent central banks and government budgets were kept “balanced,” economies would normally be stable at their “natural rate of unemployment.”
A notable turning point was the 2013 rehabilitation of fiscal multipliers by the International Monetary Fund’s then-chief economist Olivier Blanchard and his colleague Daniel Leigh.
Mark Carney, the outgoing governor of the Bank of England, recently admitted as much, saying that commercial banks had been “useless” for the real economy after the slump started, despite having had huge amounts of money thrown at them by central banks.
Robert Skidelsky Project Syndicate 17 February 2020
Who’s Afraid of Fiscal Policy?
https://www.project-syndicate.org/bigpicture/who-s-afraid-of-fiscal-policy
In the 1970s came the monetarist counter-revolution, led by Milton Friedman. The only stabilizing that a capitalist market economy needed, Friedman said, was of the price level.
Provided that inflation was controlled by independent central banks and government budgets were kept “balanced,” economies would normally be stable at their “natural rate of unemployment.”
A notable turning point was the 2013 rehabilitation of fiscal multipliers by the International Monetary Fund’s then-chief economist Olivier Blanchard and his colleague Daniel Leigh.
Mark Carney, the outgoing governor of the Bank of England, recently admitted as much, saying that commercial banks had been “useless” for the real economy after the slump started, despite having had huge amounts of money thrown at them by central banks.
Robert Skidelsky Project Syndicate 17 February 2020
Who’s Afraid of Fiscal Policy?
https://www.project-syndicate.org/bigpicture/who-s-afraid-of-fiscal-policy
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