Saturday, December 17, 2011

A Keynesian Calls (Surprise) for More Money Printing in the Eurozone

Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University and author of a 3 volume biography of John Maynard Keynes (see The Case for Skidelsky as a Liar), writes at Project Syndicate:
The ECB should be empowered to buy any amount of Greek, Italian, Spanish, and Portuguese government bonds needed to drive down their yield to near the German rate. This might stimulate real growth through several channels: by reducing lending rates, by raising the nominal value of public and private assets, and by weakening the euro against the dollar and other currencies.
But this inflationary policy is not enough. On top of this madness, Skidelsky wants central planned government investment spending (traslation: the creation of even more government waste}
But the effects of quantitative easing on economic activity are uncertain, and such an inflationary policy might well invite retaliation from Europe’s trading partners.

That is why quantitative easing should be run in conjunction with a eurozone-wide investment program designed to modernize the creaking infrastructure of eastern and southern Europe. Capital spending by governments, unlike current spending, can be self-financing through user charges. But, even if it is not, well-chosen public investment produces high returns: new roads reduce transportation costs, and new hospitals produce a healthier workforce.
I am always baffled by these part-time central planners. What is it with them, do they believe in central planning or not? Central planning doesn't work, and Skidelsky must understand this to some degree, if he is not calling for full blown central planning. But if he understands this, how does he then come out and call for central planning and government spending, especially in sectors like hospitals and healthcare.



  1. Contrary to what he says, the "effects of quantitative easing on economic activity" is certain.

    Quantitative Easing creates malinvestments in the economy. It keeps current losing projects going, while they should be liquidated. It squeezes the entrepreneurs who are efficiently satisfying consumer demand by driving up the prices of labor & commodities.

    Where has this guy been?

    And what's with the "well-chosen public investment" nonsense?

    Public "investment" can never be "well-chosen" since government does not operate with profits & losses. Government is always and everywhere throwing darts in a pitch black room.

  2. Amazing indeed...are you saying that public infrastructure is inherently a waste of money? And where does 'central planning' come into this? Perhaps you think that the construction and repair of roads, sewers and such should be left to 'market forces'?

  3. @Anonymous 11:44 AM,

    While I can't speak for Chris intent, why does this not seem even possible to you? There's certainly nothing irrational about it.