Barkley Rosser:
In none of these, 1945-46, 1982-83, or 2007-10, did we see either deflation or wage declines. However, in one of them there was only a very brief downturn, one quarter at the end of WW II; one of them there was a pattern that resembled 1921, a sharp fall in output with sharply rising unemployment, followed by a rapid rebound, the Reagan recession, and then the deep fall followed by the slow recovery in the most recent episode. What differentiates these? Well, monetary policy.
At the end of WW II, in contrast to the end of WW I, there was no tightening of monetary policy...
In the Reagan recession, this clearly was brought on by the extremely tight monetary policy of Volcker that had been put in place to crack entrenched inflation...
Finally, why the slow recent recovery? Well, I think there is more going on, but some of it has indeed been the inability of the Fed to provide much stimulus...
At the end of WW II, in contrast to the end of WW I, there was no tightening of monetary policy...
In the Reagan recession, this clearly was brought on by the extremely tight monetary policy of Volcker that had been put in place to crack entrenched inflation...
Finally, why the slow recent recovery? Well, I think there is more going on, but some of it has indeed been the inability of the Fed to provide much stimulus...
Anything else different?
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| Graph #1: Accumulated Total Debt as a Multiple of GDP |
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| Graph #2: Accumulated Total Debt as a Multiple of Spending Money |
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| Graph #3: Accumulated Total Debt as a Multiple of Base Money |
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| Graph #4: Accumulated Total Debt |
I don't read lots of Barkley Rosser. Maybe when he says "Well, monetary policy" he is referring not only to money and interest rates, but also to credit growth and accumulated debt. If so, then I have my title wrong.
But I don't see any differentiation of money from credit in Rosser's remarks. I don't see anything about accumulated total debt. I see "no tightening". I see "extremely tight". And I see "the inability of the Fed to provide much stimulus". The last of those is a reference to the idea that interest rates are at the zero bound, so that the Fed cannot lower interest rates enough to get us out of a tight money situation.
Everybody knows the phrase "tight money". So nobody has to stop and think about it. Well, I want you to think about it, just for a minute. Think about this:
Tight, relative to what?
Judge the tightness of money by comparing money to accumulated total debt.
1 comment:
Judge the tightness of money when you sit down to pay your bills. For most of us, money is tight.
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