tag:blogger.com,1999:blog-3621026.post5583883405368187060..comments2024-03-29T06:05:04.162+01:00Comments on Robert's Stochastic thoughts: A Question for Those Skeptical about Fiscal StimulusRoberthttp://www.blogger.com/profile/14455788499385673507noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-3621026.post-21536456662971707842015-02-02T18:23:35.577+01:002015-02-02T18:23:35.577+01:00Robert: "In the question I should have specif...Robert: "In the question I should have specified that the growth of money is the same no matter what fiscal policy is followed."<br /><br />OK. Then the only way the government can reduce inflation is by reducing the deficit. Standard Keynesian ISLM reasoning. It only works temporarily, but it's better than nothing. (Unless you get fancy with micro tax reforms that will permanently increase the real growth rate.)Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-88147438967455204402015-02-02T17:36:13.516+01:002015-02-02T17:36:13.516+01:00I should have linked to Lucas and to Fama (as usua...I should have linked to Lucas and to Fama (as usual I didn't expect Thoma to link to me). Their argument did not depend on monetary policy at all -- it would work with a fixed money supply and with a monetary authority which targetting the nominal interest rate.<br /><br />In the question I should have specified that the growth of money is the same no matter what fiscal policy is followed.<br /><br />@dwb your comment, in particular, is odd. The skeptics of fiscal policy definitely didn't include Ben Bernanke who asked Congress for help stimulating. I see no basis for the idea that the FOMC would have offset stimulus. Yet, at the time, there were stimulus skeptics (including among others a solid majority in Congress) <br /><br />You use "working" with two different meanings -- ineffective and suboptimal. The question (again I should have linked) is whether fiscal policy can affect aggregate demand. the Nobel Laureates said or wrote no.<br /><br />Fama<br />http://www.dimensional.com/famafrench/2009/01/bailouts-and-stimulus-plans.html<br /><br />the link seems to be dead, he is quoted by DeLong<br />http://delong.typepad.com/sdj/2009/01/eugene-fama-rederives-the-treasury-view-a-guestpost-from-montagu-norman.html<br /><br /><br />Lucas <br />http://www.cfr.org/united-states/why-second-look-matters/p18996?breadcrumb=%2Fregion%2F210%2Famericas<br /><br />search for (Laughs.)<br /><br />You see no specification of monetary policy in either case. Their claim is made for any monetary policy.Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-4248113601880326322015-02-02T16:45:31.110+01:002015-02-02T16:45:31.110+01:00This is a false comparison.
In the US fiscal stim...This is a false comparison.<br /><br />In the US fiscal stimulus would be offset by monetary policy. There would be no change in aggregate demand.<br /><br />In Argentina, fiscal stimulus (or it's opposite) might work because the monetary authorities are pursing the wrong policy (too low interest rates). So, this is less of a case of fiscal stimulus working, than a case of monetary policy *not* working.dwbhttps://www.blogger.com/profile/02799793864068767226noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-49259432481104114762015-02-02T14:51:16.530+01:002015-02-02T14:51:16.530+01:00Put people to work building stuff and pay them wel...Put people to work building stuff and pay them well. Impose capital controls and whatever other controls one needs to take speculators to the cleaners. You guys over think things, in my opinion.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-1211497209052090182015-02-02T04:08:48.423+01:002015-02-02T04:08:48.423+01:00Robert: fair question.
If we have fiscal dominanc...Robert: fair question.<br /><br />If we have fiscal dominance, where the central bank has no independence, and is forced to print enough money to finance the exogenously-chosen deficit, then the "monetary offset" argument cannot apply, and the only way to bring down inflation is to reduce the deficit.<br /><br />In the long run: 1. Does the monetary authority print what the fiscal authority spends? Or 2. Does the fiscal authority spend what the monetary authority prints?<br /><br />For Canada (and I think the US) I think that 2 is true. For Argentina, I suspect 1 may be true.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-66230396589335974952015-02-02T02:24:05.226+01:002015-02-02T02:24:05.226+01:00What's it like being on the dark side, Peter?What's it like being on the dark side, Peter?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-2361303169922125702015-02-02T01:30:45.936+01:002015-02-02T01:30:45.936+01:00I assume you are being ironic. Cutting taxes on th...I assume you are being ironic. Cutting taxes on the wealthy, deregulating and privatizing might boost productivity, but they lower wages and living standards. Lower living standards are not going to make people work harder, look at the Soviet Union or the modern US.Kaleberghttps://www.blogger.com/profile/05283840743310507878noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-49856196829128379512015-02-01T15:43:35.197+01:002015-02-01T15:43:35.197+01:00The answer is that Argentina needs to cut taxes (f...The answer is that Argentina needs to cut taxes (for the wealthy), deregulate and privatize. This will boost long-term productivity.<br /><br />Also cut social insurance. It will make people work harder.Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.com