Did Central Banks Blow It by Not Coordinating Stimulus?
Posted by WARREN MOSLER on October 3rd, 2012
The mainstream is really grasping for straws now.
How about what the call ‘stimulus’ is in fact nothing of the sort?
Seems no amount of evidence will change their minds.
As Paul Samuelson once quipped, economics changes one funeral at a time.
Meanwhile, as previously discussed, the ECB has solved the solvency issue,
and they’re now left with just the bad economy part,
with ‘conditionality’ there to ensure the output gap never closes.
This is strong euro medicine, but US austerity and the fiscal cliff is highly
dollar friendly, and it’s all very much the same globally.
So overall it’s an ongoing case of low demand/large output gaps and self imposed global misery
with no end in sight.
Did Central Banks Blow It by Not Coordinating Stimulus?
In the space of 30 days, five major central banks took turns to deliver aggressive stimulus measures in a bid to boost growth. Could they have made a bigger impact if they had announced the measures on the same day?
October 3rd, 2012 at 11:56 am
at top finance&political manager level is only a problem of understanding or is a problem of willingness ?
and if 2° case: why ? what interest ?
Reply
October 3rd, 2012 at 1:40 pm
“Did Central Banks Blow It by Not Coordinating Stimulus?” I’ll just translate the word “stimulus” there. It means “offering loads of cheap money to potential borrowers, who won’t borrow beause the demand isn’t there to support such borrowing”.
For futher clarification, Google the phrase “push on a piece of string”.
Reply
WARREN MOSLER Reply:
October 8th, 2012 at 7:38 pm
right, and part of the missing demand is due to savers losing income due to the rate cuts
Reply
October 4th, 2012 at 6:31 am
I bet alot of “blow” went around with the last stimulus
Reply
October 4th, 2012 at 9:44 am
. Could they have made a bigger impact if they had announced the measures on the same day?
So it’s not what’s actually done that counts, it’s the perception, the “impact”, that’s meaningful.
Reply
Ed Rombach Reply:
October 5th, 2012 at 7:50 am
@chuck martel,
Often times perception is reality. It works like a placebo. If enough people believe it, it becomes a self fulfilling prophesy. MMT is trying to bring about a paradigm shift, but it is up against a prevailing zeitgeist that interprets the world in a different way.
Reply
Walid M Reply:
October 5th, 2012 at 11:15 am
@Ed Rombach,
Galileo deduced the earth was not the center of the universe in 1610 , the Church acknowledge it in 1822 …
Reply
Unforgiven Reply:
October 6th, 2012 at 2:03 am
@Walid M,
Mosler for Congress 2012.
The year we learn that gold is not the center of the economy.
October 4th, 2012 at 12:13 pm
Now this is funny:
“Japans minister of economy want bank of japan to do something it has never done before… *drumdroll* buy foreing government bonds!!”
http://www.bbc.co.uk/news/business-19824704
Reply
WARREN MOSLER Reply:
October 8th, 2012 at 7:42 pm
aka, selling the yen
Reply
October 4th, 2012 at 2:06 pm
Great article Warren!Thanks!Little of topic but a must read i think:
“Hicks rejection of IS/LM by Lars P Syll
with background story in a comment from Paul Davidson.
http://rwer.wordpress.com/2012/10/04/on-krugmans-reading-list/ and
http://larspsyll.wordpress.com/2012/10/04/hicks-rejection-of-is-lm/
Reply
WARREN MOSLER Reply:
October 8th, 2012 at 7:43 pm
islm is fixed fx analysis
Reply
October 4th, 2012 at 2:30 pm
Any thoughts on why the disconnect between stocks and the underlying global economic ‘misery’
Reply
Piero from Italy Reply:
October 5th, 2012 at 4:40 am
@Walid M,
if Global Bank Affairs gain if a Financial Instrument go up then this will go up even if the underling fundamental are bad..
and vice versa.. now they have stockpiling some commodity with liquindity of Central Bank.. and on medium term the price will go up with some fake reason or another.. this is the real market.. not the market movers that we read even on the specialized media..
Reply
WARREN MOSLER Reply:
October 8th, 2012 at 7:45 pm
the larger companies that we call ‘stocks’ are the survivors- the ones that can make a buck in this kind of environment.
all they need is a bit of top line growth, wages under control, and higher p/e’s due to lower discount rates
Reply
Piero from Italy Reply:
October 9th, 2012 at 4:37 am
@WARREN MOSLER,
yes..untill higher discount rates (2015?) they will go up..
Reply
October 8th, 2012 at 2:25 pm
Central Banks blew it by doing stimulus in the first place. Just delaying the inevitable.
Reply