> Talking about a revolution<p>> Many economists want precisely this state intervention, but it presents clear risks. Governments which already carry heavy debts could decide that worrying about deficits is for wimps and that central-bank independence does not matter. That could at last unleash high inflation and provide a painful reminder of the benefits of the old regime.<p>Sounds more like a plea than a warning, coming from The Economist. Prophecies of inflation seem like a joke in a time of record low inflation with high government deficits. Just look at the case of Japan for one.
I believe it's not really "rethink" as if we had once figured it out correctly in the past already. We are still actually thinking it for the first time, specially if you consider economists and policy makers were yet looking for "something new" (mentioned in the article) in macroeconomics during the last, what, 50 years? It's all pretty new, which suggests to me that it is all in a pretty extremist and radicalized state: it doesn't have to be 100% trickle down reaganomics or 100% state interventionism exclusively. I'm very confident a major crisis like this one will make key people finally realize that a mix of free global markets + welfare states focused on reducing inequality + democratic institutions will be the answer to many macroeconomics problems. Very few countries have realized this, the rest of the world meanwhile will keep shouting at each other doubling down on stupid policies not based in good examples and will keep blaming keynesianism or whatever neoliberal approach they can't understand.
I'm a real dummy when it comes to economics, so I have a question. What is the theory that buying assets like stocks boosts the economy? Doesn't this just create incentives to hold on to those stocks, so that you can reap the growth? Given that most stocks by far are held by wealthy people, it's hard to see how this stimulates demand, since they already are able to buy what they want. Theoretically, they might eventually sell the assets and then start a new business or something, but this seems very indirect. Isn't it easier to just hold the stocks/real estate? I don't really understand why holding a stock is considering investing, since the company (where the actual employment and production happens) doesn't see a benefit.
Financial repression[0], 0% interest rates and higher inflation, to inflate away trillions of $$ of national debt and drive up <i>nominal</i> GDP, is the order of the next decade.<p>We've reached the limits of what central banks can do, from here on out it's direct government intervention in the commercial credit sector, and driving up demand through fiscal policy.<p>[0] <a href="https://en.wikipedia.org/wiki/Financial_repression" rel="nofollow">https://en.wikipedia.org/wiki/Financial_repression</a>
Thomas Piketty, in [Capital in the Twenty-First Century][money]:<p>> Yet it seems to me that all social scientists, all journalists and commentators, all activists in the unions and in politics of whatever stripe, and especially all citizens should take a serious interest in money, its measurement, the facts surrounding it, and its history. Those who have a lot of it never fail to defend their interests. Refusing to deal with numbers rarely serves the interests of the least well-off.<p>[Rutger Bregman][ubi]:<p>> Poverty isn’t a lack of character; it’s a lack of cash.<p>[money]:<a href="https://www.tbray.org/ongoing/When/201x/2014/05/01/Piketty-Capital" rel="nofollow">https://www.tbray.org/ongoing/When/201x/2014/05/01/Piketty-C...</a><p>[ubi]:<a href="https://www.ted.com/talks/rutger_bregman_poverty_isn_t_a_lack_of_character_it_s_a_lack_of_cash" rel="nofollow">https://www.ted.com/talks/rutger_bregman_poverty_isn_t_a_lac...</a>
<i>Just as inequality creates a need for stimulus, they argue, stimulus eventually creates more inequality. </i><p>Particularly when your predominant stimulus tool is 'print money to buy assets rich people have.'
For those of us who've read <i>The Economist</i> for two or three or four decades, perhaps more, "rethinking economics" is a reliably recurring evergreen which gets trotted out at times of crisis. When the paper is feeling merely foreward, a possibility that Keynes may not have been <i>completely</i> wrong is broached. In periods of sheer desperation, a hesitant suggestion that subscribers might <i>read</i> (but never follow) Marx is hauled from the deepest rhetorical powder magazines.<p>But that's about the limit of it.<p>The one change I <i>have</i> noted is that where the tactic was invoked only once or twice a decade, its use now seems far more frequent, every few years in the aughts, now only months apart. A search of the paper's archives, or external Web search, largely confirms this:<p><a href="https://duckduckgo.com/?q=rethinking+(macroeconomics%7Cmicroeconomics%7Ceconomics)+site%3Aeconomist.com" rel="nofollow">https://duckduckgo.com/?q=rethinking+(macroeconomics%7Cmicro...</a><p>Whilst I'm strongly convinced that economic orthodoxy is sharply flawed, monetarism a stunted model like its progenitor, Keynes was insightful, and that Marx's class-consciousness has merits, full understanding and remedy for present concerns must look further afield.<p>MMT, W. Brian Arthur's complexity economics, and Steve Keen's work unifying capital, labour, class, and energy would be a good start.
"a monetary policy that is not constrained by the presence of physical cash", that is like saying a democratic government that is not constrained by the need for voting.
Given that this is precisely what it’s spent the last 30 years coming to understand, it’s baffling that there is only a single paragraph in this article about Modern Monetary Theory. And one at that certainly doesn’t convey the nuance of the theory at all.<p>For anybody seriously interested in the subject I would recommend the 2019 textbook ‘Macroeconomics’ by Mitchell, Wray & Watts.
This used to be called "secular stagnation". There's not much forward progress, but nobody really understands why. Japan hit this first, in their 1989 housing crash. In the mid-1980s, Japan seemed poised to dominate the world economy. After the crash, Japan never came back.[1]<p>There was a fear that the US would hit that after the 2008 crash. But the US did come back. At least until the epidemic.<p>Macroeconomists think macroeconomics determines what happens. Sometimes it does, and sometimes it doesn't. When it doesn't, central bankers are totally lost about what to do.<p>Should a country have an industrial policy? The traditional answer in capitalist countries is "no". But it worked for Japan, S. Korea, Singapore, and China, which now make most of the world's good stuff. China's current industrial policy, set in 2015, is called "China 2025"[2][3]. The plan is to achieve dominance in the remaining sectors where China is behind - aircraft, ICs, etc. It's not talked about much outside China, but it's still the operating plan. The main items in 2015 were:<p>1. New advanced information technology<p>2. Automated machine tools & robotics<p>3. Aerospace and aeronautical equipment<p>4. Maritime equipment and high-tech shipping;<p>5. Modern rail transport equipment<p>6. New-energy vehicles and equipment<p>7. Power equipment<p>8. Agricultural equipment<p>9. New materials<p>10. Biopharma and advanced medical products<p>Halfway through the 10-year plan, China is doing well on at least 7 of those items.<p>Western countries are assuming that the knobs controlled by the financial system determine what happens. When the biggest country on the planet isn't playing that game, that approach may not be competitive.<p>[1] <a href="https://www.csis.org/analysis/made-china-2025" rel="nofollow">https://www.csis.org/analysis/made-china-2025</a><p>[2] <a href="https://www.pbs.org/wgbh/frontline/article/made-in-china-2025-the-industrial-plan-that-china-doesnt-want-anyone-talking-about/" rel="nofollow">https://www.pbs.org/wgbh/frontline/article/made-in-china-202...</a><p>[3] <a href="https://static.seekingalpha.com/uploads/2019/1/21/saupload_Japan-Nikkei-225-Index-2017-04-03-chart.png" rel="nofollow">https://static.seekingalpha.com/uploads/2019/1/21/saupload_J...</a>
The article pleads for more workers rights and bargaining power. While I think that is a noble wish, it is an illusion, and they know it. The article describes "out of the box" thinking, but it is still hopelessly trapped.