Bernanke, Yellen: Congress Should Increase Deficit. Debt Concerns Not Paramount In Emergency
By Ben Bernanke and Janet Yellen
on July 17, 2020
In many respects this recession is unique. Most recessions result from developments inside the economy, but an external shock–the public health crisis–caused this one. To avoid getting sick, people have curtailed working, shopping, and attending school. Whatever the cause, the coronavirus recession, like all recessions, is imposing heavy costs. Many workers have lost jobs and income, and many business owners’ financial survival is at risk
Perhaps in addition to Market Maker of Last Resort and Lender of Last Resort, the Fed should add:
Disease Expert of Last Resort
Congress of Last Resort, and
Administration of Last Resort
Mr H., I think they are plagiarizing you.
At least up until the last paragraph! Still hewing to the idea of government taking advantage of “extremely low interest rates” instead of acknowledging that the government (Fed) is setting the interest rates. I suppose not totally at odds with H, but still a refusal to acknowledge the existing practice of MMT. I suppose they have to make some vague gesture toward long-run fiscal sustainability to try to garner support for more fiscal stimulus.
They dare not say that out loud. MMT is a political hot potato. MMT does not advocate always “free money”
but will incorporate higher taxes and interest rates to cool inflation as labor markets heat up. Full employment is the real goal shifting from private to Govt as the economic cycle dictates. We could go through several economic cycles before anyone has to admit it is MMT.
“Nothing is more important for restoring economic growth than improving public health. Investments in this area are likely to pay off many times over.”
If this is not a justification for and ringing endorsement of universal healthcare, I don’t know what is.
Human nature I suppose, but no one is talking about particular programs in this piece. The dialogue starts when the labels come out such as MMT. Something similar happens with climate change and I’m sure there are many others. Jumping from specifics to labels derails attempts to take specific concrete actions. Add to this the fact that governing leaders believe they can’t be wrong or they’ll be removed and you have a government that is very inadequate in times that are changing rapidly.
This economy did not get where it got by coincidence ….There were choices along the way some of which were made by Congress some by the Fed… Their results created fallow ground for seeds of disaster and like preceding Empires set the table for a reckoning…This is not a moral hazard argument merely an expression of man’s attempts to use intellect and ingenuity to alter the scheme of what is Historical probability… I kind of see it more and more like Dalio the more I read his studies…I do agree with H….on one point and that is when disaster hits for whatever the reason …you gotta’ do what you gotta’ do irregardless of the recriminations and consequences….
An exercise in stating the obvious. What audience did they think they were writing for (or to)? Next!
Aye, and there’s one of the key problems. The audience they need to reach are those to whom it’s not obvious.
The post-GFC regulatory failure was hinted at in this piece although not specifically stated. That failing was how much of the regulated bank risk was shifted to the shadow banking system–such as hedge funds which was on display with the well documented carnage in the Treasury basis trade. That played into or poured petrol on the issues around market functioning. The one aspect of today which I am guilty of but still find annoying is why those of us with PhD’s in economics find the urge to offer up analysis that is best left to epidemiologists of the world. I suppose it can’t be helped.