Category Monetary policy
ZIRP Deficits cause Crowding In of Investment, by reducing Deflation
I am going to make a very simple point, which has (I think) been missed in the current blog debate over whether deficit spending will crowd out or crowd in investment: deficits reduce expected deflation, which crowds in investment.
International coordination with ZIRP, and Functional Finance
"Deficits and debt don't matter, we owe it to ourselves; we should run as big a deficit as needed to get our country out of recession." "International coordination of fiscal policy is needed to make sure each country runs a big enough deficit to get the world out of recession." Your choice. One or the […]
The Bank of Canada’s Assets
When I was writing my last post, on commercial and central bank solvency , I wasn't sure whether it was worth posting, because maybe everybody already knew this stuff. But I decided to post it anyway. Now I'm glad I did. I got some good comments from JKH, which opened up a new avenue to […]
Two perspectives on commercial and central bank solvency
I start a bank. I have zero capital. I borrow $100 and lend $100. What is the net worth of my bank? Looking at the balance sheet, the answer is simple and obvious: assets $100, liabilities $100, net worth = assets minus liabilities = $0. But looking at the income statement we may get a […]
Does Canada need a Fiscal Stimulus? – Discuss
My own view, for what it's worth, is that Canada does not need a fiscal stimulus right now, but there's a possibility it might need one soon, so the government should get everything ready to introduce one as quickly as possible, but not pull the trigger quite yet. My preferred fiscal stimulus would be a […]
Monetary policy and durable goods deflation
In a recent post, Nick made an important point about the story we tell when we explain why deflation is a bad thing. If prices are falling, people will delay purchases, which reduces aggregate demand, which induces more rapid deflation, which reduces aggregate demand even more as the economy circles the drain. But to make […]
Will Deficit Spending in fact be Money-Financed?
It's easy to say that money-financed increases in government spending should be used as a weapon of last resort, if the central bank runs out of ammunition as nominal interest rates fall to zero. But would government deficits in fact be money-financed? If the central bank targets the monetary base, the answer is trivial: if […]
A Useful Definition of “Deflation” – the Principle of Charity
Some prices are falling, some are falling quickly, and some are still rising. Whether we've got deflation, and how much deflation we've got, depends on what you include in the index, with what weights, and over what time period. Do we include asset prices for example? It depends on how you define the word. Now […]
Drawing the wrong lessons from policy errors
I've been spending much of the day thinking about the Coyne Affair. You may well ask what the Coyne Affair is; it seems to be one of the few things for which there is no convenient Wikipedia entry to which I can direct you. The Coyne Affair refers to James Coyne, who was Governor of […]
How do we stop it from happening again?
Nick Rowe passes this along: We failed. By “we” I mean economists. Sure, there’s a lot of blame to go round; a lot of people made bad decisions. But we didn’t know how to design a financial system which is robust enough to cope with people making bad decisions. If some people paid too much […]
Worthwhile Canadian Initiative 
Recent Comments