Englund

Gone are the days when the political right and left could be distinguished by competing theories: free market, monetarist, or Keynesian.  Today, economic policy is mostly a grab bag from which policy interventions are found to address specific economic grievances. No overarching economic theory guides either party’s approach to policymaking. By the end of the 1990s all the talk was of the “Washington consensus,” an approach that argued prosperity and stability could be achieved via orthodox monetary and fiscal policies, alongside vigorous engagement in international trade. The Washington consensus, however, was never quite as widely fancied within the economics profession as it was amongst politicians.  It is not that economists disagreed with the merits of independent central banks tasked with keeping inflation low, deregulation, or increased globalization.  Rather, the economics profession noted that those pillars, while necessary for growth, shared prosperity, and stab...

There are two ways to tell the story of neoliberalism after its triumph. The first is a familiar narrative of hubris and excess. Neoliberals were zealots who carried their ideas too far.  The second way of telling the story begins by paying more attention to how economic ideas are generated, and how their progenitors reckon with messy realities.  Both Burns’s book and economists Bruce Caldwell and Hansjoerg Klausinger’s Hayek: A Life, 1899-1950 – the first volume of what will surely be the definitive biography of Friedrich von Hayek – are masterpieces in this respect, offering a pathway to reconstruct neoliberalism’s intellectual history. In 1931, an invitation to lecture at the London School of Economics pulled Hayek out of the Austrian vortex and brought him into the center of a debate over how the state might compensate for the marketplace’s failures.  Jennifer Burns, Milton Friedman: The Last Conservative, Farrar, Straus and Giroux, 2023. Bruce Caldwell and Hansjoerg ...

To misquote Milton Friedman, inflation is often and mostly a monetary phenomenon.  Across rich and emerging economies, public-debt loads have soared over the past two decades. Central banks will eventually have to help finance governments’ obligations, say by creating new money to buy bonds.  The fiscal firepower deployed during the covid-19 pandemic may also reflect governments’ greater openness to using stimulus to fight recession Population growth in the rich world has slowed dramatically owing to demographic change and lower immigration. Globalisation served as a “gigantic shock absorber”, from the 1980s into the 2010s, noted Isabel Schnabel of the European Central Bank, such that shifts in demand or supply were easily met through corresponding adjustments to production, rather than wild swings in prices.  Most crucially, there is less intellectual confusion today than there was in the 1970s. As Mr Powell noted, central bankers once needed convincing that they could a...

Nicholas Wapshott’s book, Samuelson Friedman: The Battle Over the Free Market. Friedman’s victory was ambiguous. Though Paul Volcker’s interest rate hike in 1979 put a stop to inflation in the US, Friedman disowned the experiment. The shock therapy that Volcker administered was not monetarism as Friedman envisioned it.  To mark Friedman’s 90th birthday in 2002, Ben Bernanke paid tribute to him and Schwartz. Referring to the Fed’s baneful role in the Great Depression, he remarked: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.” In 2008 Bernanke and his colleagues let Lehman Brothers fail. The result was to drive the world to the brink of the greatest financial crisis since the 1930s. Adam Tooze FT 14 October 2021 https://www.ft.com/content/b04dd8d1-75bd-4aaa-bf60-36ad73faac93 Kaletsky menar att det var Paul Volcker som ledde återgången till "demand management". https://englundmacro.blogspot.com/2018/01/kaletsky-menar-att-det-var-paul-volck...

 Inflation är alltid och överallt ett monetärt fenomen Cervenka DI 28 jan 2021 https://www.di.se/analys/inflationen-ar-redan-har-och-det-med-besked/

Farbror Joakim hade sina penningbingar med guldpengar. När han köpte något blev det mindre kvar. Detta är ett synsätt som många har svårt att frigöra sig ifrån. Har vi råd med alla dessa stödåtgärder frågan sig många, alltför många. Men dom har väl inte läst vare sig Keynes eller Friedman. "Om man har en sedelpress går man inte i konkurs", skrev jag nylige n. Man har en sedelpress om man har en egen valuta och inte är med i EMU. En utgift är en belastning om den medför att man inte kan göra något annat för dessa pengar.  Underskottet i statsfinanserna är en ointressant siffra. Staten kan ge ut obligationer som Riksbanken köper. Den går inte i konkurs för den har verkligen en sedelpress. Man skall i stället, återigen efter många år, hålla ett öga på penningmängden. Om ett företag eller en löntagare går med förlust och detta underskott täcks av statsbidrag är penningmängden oförändrad.   Vi måste också sluta med fiktionen att Riksbanken inte är en del av st...

As far as we can tell Alan Greenspan was right only a single time after he took the helm of the Fed in August 1987.  Said the Maestro: - A decision to base policy on measures of money presupposes that we can locate money. And that has become an increasingly dubious proposition. Note that these words were spoken on June 28, 2000 in the very inner sanctum of the Eccles Building. They were recorded word for word in the FOMC meeting transcript and released with a ten year lag  Friedman had been a closet Keynesian all along, and had erroneously claimed that GDP growth and prosperity were a function of money supply growth, and that the change rate of the latter, in turn, could be managed to nearly the decimal point by the rate of growth in high-powered money ladled out by the Fed. David Stockman May 21st, 2019 Monetarism Alan Greenspan

In the past, I used the name “MDuh” for bank-created money, the measure Friedman and Schwartz studied, not the measures they popularized For this article, though, I’ll use “M63,” referring to the ye ar they published their work. Read more here

But as economists get better and better data, they’re finding that even modification isn’t enough.  A new study by Peter Ganong and Pascal Noel shows that consumer behavior is more short term than almost any mainstream model predicts. Even the greatest scientists can be wrong. The measure of a science is how quickly it comes to grips with the mistakes its heroes make. Noah Smith, Bloomberg 12 January 2017

E21 6 November 2016 Yellen should re-read Friedman’s “The Role of Monetary Policy” and lay the Phillips curve to rest The Market Monetarist 

Inflation is always and everywhere a monetary phenomenon … –Milton Friedman, “The Counter-Revolution in Monetary Theory” (emphasis in original) Matthew Klein, FT Alphaville 30 August 2016 Många av oss kommer ihåg när Bildt och Wibble lade fram sina sparpaket när budgetunderskottet skenade när räntorna steg (för att försvara växelkursen) och inkomsterna sjönk när konjunkturen gick ned. Kronkursförsvaret

Friedman famously held the Fed responsible for the depth and duration of what he called the Great Contraction… in sharp contrast to hard-core laissez-faire opponents of Fed policy, who regarded even the mild and largely ineffectual steps taken by the Fed…  as illegitimate interventionism to obstruct the salutary liquidation of bad investments, thereby postponing the necessary reallocation of real resources to more valuable uses… Brad DeLong 27 April 2016

Keynes’s second major legacy is the notion that governments can and should prevent depressions.  Milton Friedman reasserted the pre-Keynesian view of how market economies work.  Inflation, Friedman said, resulted from attempts by Keynesian governments to force down  unemployment below its “natural” rate.  An even bigger shock to the pre-2008 orthodoxy than the collapse itself was the revelation of the corrupt power of the financial system and the extent to which post-crash governments had allowed their policies to be scripted by the bankers.  Robert Skidelsky, Project Syndicate 23 Febr 2016

År 2005 tog jag mig före att genomföra detta storhetsvansinniga projekt. Det har inte varit särskilt framgångsrikt och det har inte mötts med hejarop utan med förmodligen välgrundade tvivel av den enda person som kommenterat mitt inlägg. http://englundmacro.blogspot.se/2005_02_01_archive.html Sedan kom finanskrisen och eurokrisen och det hela föll i glömska. Men häromdagen fick jag ny inspiration när jag läste en artikel i Financial Times av Noah Smith, Bloomberg 5 August 2015. http://www.internetional.se/ostskol.htm#noa Han skrev att den österrikiska skolan inser att "productive capital come in multiple forms, while mainstream macro usually assumes that all forms of capital are interchangeable". Aha, tänkte jag, penningmängden är inte som vatten i en pool, utan i hinkar eller vattenkannor, som flödar över olika ställen av ekonomin. Jag har länge varit inne på tankegångar av detta slag. - Bättre då att Fed köper statspapper i stället för bostadsobligationer....

I have a dream. It is to create an, or rather, the, Hayek-Friedman-Keynes Synthesis, skrev jag, med en ödmjukhet väl i klass med Klas Eklund, på denna blog den 7 februari 2005 . Föga överraskande kanske har mina framsteg med detta varit i det närmaste obefintliga.Men nu kommer eldunderstöd från ingen mindre än Krugman. -The truth, although nobody on the right will ever admit it, is that Friedman was basically a Keynesian — or, if you like, a Hicksian.   His framework was just IS-LM coupled with an assertion that the LM curve was close enough to vertical — and money demand sufficiently stable — that steady growth in the money supply would do the job of economic stabilization.   These were empirical propositions, not basic differences in analysis; and if they turn out to be wrong (as they have), monetarism dissolves back into Keynesianism.   Paul Krugman, NYT blog 14 March 2012 Friedman - Hayek - Keynes

BBC News - Keynes v Hayek: Two economic giants go head to head Together we will create The Hayek-Friedman-Keynes Synthesis. I have a dream. It is to create an, or rather, the Hayek-Friedman-Keynes Synthesis. Is it re-inventing the wheel or an attempt to square the triangle? http://englundmacro.blogspot.com/2005_02_01_archive.html

Welcome! Here is my plan: Together we will create The Hayek-Friedman-Keynes Synthesis. I have a dream. It is to create an, or rather, the Hayek-Friedman-Keynes Synthesis. Is it re-inventing the wheel or an attempt to square the triangle? Well, it is an attempt to use The Open Source Method for that purpose as I guess that I will fail if I try to do it myself. Let us start with reading Roger Garrison's Hayek-L Seminar introduction at http://www.hayekcenter.org/