Sunday , January 19 2020
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Tag Archives: Fiscal

MMT Heaven and MMT Hell

By Michael Pettis This post first appeared at China Financial Markets on the Carnegie Endowment for International Peace  There are conditions under which governments can create money—or debt—without fear of inflation or excessive debt burdens. There are other conditions under which debt or money creation can lead to inflation and balance sheet problems. Modern monetary theory (MMT) isn’t discussed much in Chinese universities as far as I can tell, except by a few of my Chinese...

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Our over-reliance on monetary policy is the problem

I am going to argue here that monetary policy is both less effective than fiscal policy, and that over-reliance on it unnecessarily politicizes monetary policy by putting unelected officials in too prominent an economic role. I would argue that monetary policy should never be the primary macro policy driver in any economy. Yet, when you look around the world it is in almost every advanced economy. It is certainly that way in the eurozone, where interest rates are negative and the...

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The Fed’s Pickle

This is a follow-up to my subscriber post from earlier today on the US economy. For those of you who are not paying subscribers, let me summarize the post by saying I think the US economy is slowing but not in a recession. Nevertheless, I think we are likely to see a recession before the end of 2020. That’s actually my base case. The obvious questions regard policy responses, particularly the Fed’s. So I am writing this post to address some of that. 50 basis points won’t happen A...

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The problem with Europe

I have been troubled by the lack of policy space in Europe for some time now, particularly as it concerns Italy. But this is coming to a head for me this morning, with the German government auctioning 10-year paper at 24 basis points below zero and some German interest rates almost 70 basis points below zero. So I want to explain what I see as the challenges ahead as well as the opportunities. By the way, this is one of the occasional free Credit Writedowns posts I write. If you...

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Sliding toward a no-deal Brexit and a US recession?

A couple of things today.The default is no-deal, the base case is extension of article 50I waited until the bust settled on the no-confidence vote before I decided to write again about Brexit. It was clear that the fear of Corbyn as PM would cause Conservative MPs to hold together. And the DUP has long said they would back May in a no-confidence vote. But, notice that May would have lost the no-confidence vote without their support. So, it is vital now that she return the...

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