KEYNES RESSUSCITADO E O HELI BEN

O QUE DIZ MARTIN WOLF

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Keynes offers us the best way to think about the financial crisis
Sixty-two years after Keynes’ death, in another era of financial crisis, it is easier for us to understand what remains relevant in his teaching, writes Martin Wolf

...The shorter-term challenge is to sustain aggregate demand, as Keynes would have recommended. Also important will be direct central-bank finance of borrowers. It is evident that much of the load will fall on the US, largely because the Europeans, Japanese and even the Chinese are too inert, too complacent, or too weak. Given the correction of household spending under way in the deficit countries, this period of high government spending is, alas, likely to last for years. At the same time, a big effort must be made to purge the balance sheets of households and the financial system. A debt-for-equity swap is surely going to be necessary.
The longer-term challenge is to force a rebalancing of global demand. Deficit countries cannot be expected to spend their way into bankruptcy, while surplus countries condemn as profligacy the spending from which their exporters benefit so much. In the necessary attempt to reconstruct the global economic order, on which the new administration must focus, this will be a central issue. It is one Keynes himself had in mind when he put forward his ideas for the postwar monetary system at the Bretton Woods conference in 1944.
No less pragmatic must be the attempt to construct a new system of global financial regulation and an approach to monetary policy that curbs credit booms and asset bubbles. As Minsky * made clear, no permanent answer exists. But recognition of the systemic frailty of a complex financial system would be a good start."

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Keynes’s difficult idea (Paul Krugman)
Great piece by Martin Wolf today. I particularly liked this:
Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge.
That’s the point of my favorite Keynes quote, where he declared of the Great Depression, “we have magneto trouble.”
What’s been striking me lately is how many people who talk and write about macroeconomics just don’t get Keynes’s essential point — the fact that economies can suffer from insufficient aggregate demand because people want to acquire liquid assets rather than real goods. Not to single out any one commentator, but this morning I read this:
Government spending doesn’t increase aggregate demand. All it does is transfer spending power from one party to another by borrowing from or taxing the public.
That’s exactly the infamous “Treasury view” from the 1920s, against which Keynes had to struggle. And it’s still out there.
Anyway, good for Martin; we’re going to need every possible voice to counter the niggling nabobs of negativism.

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*Hyman Minsky (September 23, 1919, Chicago, Illinois – October 24, 1996), was an American economist and professor of economics at Washington University in St. Louis. His research attempted to provide an understanding and explanation of the characteristics of financial crises. Minsky was sometimes described as a radical Keynesian because he supported some government intervention in financial markets and opposed some of the popular deregulation policies in the 1980s, and argued against the accumulation of debt. His research, nevertheless, endeared him to Wall Street. [1].

Nouriel Roubini perguntava a 30 de Julho de 2007: "Are We at the Peak of a Minsky Credit Cycle?" - Transcrito aqui no Aliás.

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‘Helicopter Ben’ confronts the challenge of a lifetime
Central banks may resort to their most powerful weapons against deflation: the printing press and the ‘helicopter drop’ of money. Will this work? Yes. But returning to normality will prove far more elusive, writes Martin Wolf

"...Ironically, we are where we are partly because the Fed was so terrified of deflation six years ago. Now, a credit bubble later, Mr Bernanke has to cope with what he then feared, largely because of the Fed’s heroic attempts at prevention. Similar dangers now arise with the drastic measures that look ever more likely. This time, I suspect, the result will ultimately not be deflation but unexpectedly high inflation, though probably many years hence."