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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Vice Chair Kohn on fiscal expansion

Posted by WARREN MOSLER on May 26th, 2009

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Yes, he’s got that part very right!!!

>   On Mon, May 25, 2009 at 11:06 PM, Roger wrote:
>   Federal Reserve Vice Chairman Donald Kohn:
>   Interactions between Monetary and Fiscal Policy in the Current Situation
>   [I]n the current weak economic environment, a fiscal expansion may be much more
>   effective in providing a sustained boost to economic activity.
>   Doesn’t say anything about when. Looks like it’s already too late to forestall a pileup.


5 Responses to “Vice Chair Kohn on fiscal expansion”

  1. RSG Says:

    “Looks like it’s already too late to forestall a pileup.”

    Is this an incremental change to your economic outlook?


  2. knapp Says:

    “[I]n the current weak economic environment, a fiscal expansion may be much more effective in providing a sustained boost to economic activity.:

    The speech, as a whole, like Obama’s comments above, is textbook neoclassical that Krugman would support 100%. Fiscal stimulus now, until the first signs of stability, then back to a monetary policy-dominated approach. No sign whatsoever that he incorporated any of the SCE ideas you express on this site or to him in personal correspondence.


  3. warren mosler Says:


    that’s why i said only that he has ‘this part’ right


    Dissenting Comments Encouraged Reply:

    Hans Bader with the competitive enterprise institute is on C-Span right now saying the stimulus is going to cost jobs long term in the economy according to the CBO. He is also upset that we lost 40,000 US jobs to keep 97 mexican truckers out of the USA. He claims the entire timing of the stimulus is only designed for short run political goals to get democrats re-elected and not much to do with the long run health of the economy. How much crony capitalism and corrupt government can the american people sustain before the government virus kills the host?


  4. Mike S Says:


    It is going to be decades before this is accepted. I’ve been trying to think of a business that can exploit this. Unfortunately, this runs into the problems raised by behaviorial finance, where even if you are correct, and the crowd is wrong, because the crowd is far larger than your potential effect, profits are not realized

    I guess the soverign CDS markets are good for a laugh if you have the capital to ride for 5 years.


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