In the FT, from my Green New Deal colleague Ann Pettifor:
Sir, Your editorial "In praise of free markets" (September 27/28) conflates regulation of trade markets with that of financial markets.
This is a flawed analysis, one at the core of most economic orthodoxy - that money, like land, oil, soya beans, diamonds or gold, is a commodity, and therefore that trade and markets in money are no different from markets in, say, soya beans.
They are not. Money, capital, interest rates are all social constructs. We do not dig capital out of the ground and it does not grow on trees. Interest rates are set by committees of men. And so, unlike oil or soya beans, "there are no intrinsic reasons for the scarcity of capital", as Keynes argued in the General Theory.
Astonishingly the private finance sector has succeeded, against all odds, in creating a shortage of capital and forcing up the London interbank offered rate on this scarce capital.
The second extraordinary achievement of the private finance sector is the creation of debts vast as space, debts that clearly will never be paid, and that are bankrupting the finance sector.
The consequences of this incompetence are and will be immense. Pensions, homes and jobs will be lost, and there will be social unrest.
For these reasons orthodox economists and their flawed monetary theory must be abandoned, just as they were after the last great financial crisis of the 1930s.
John Maynard Keynes' cool, rational voice on monetary theory and monetary policy must once again be heeded.
Ann Pettifor, London NW1, UK
As far as I can see there is no counter-argument.
Although Keynes did buy the conventional assumptions of economics: that wants are unlimited and the means to fill them are constrained. This is wrong. Needs are limited and the capacity to meet them exists. The problem is the wasteful excess of artificially generated wants right now.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Richard,
As it relates to Keynes, from today’s WSJ:
“It is common to speak as though, when a Government pays its way by inflation, the people of the country avoid taxation. We have seen that this is not so. What is raised by printing notes is just as much taken from the public as is a beer-duty or an income-tax. What a Government spends the public pay for. There is no such thing as an uncovered deficit.” – JMK, 1923
Perhaps those wishing to run around printing money left, right, and center might want to take heed.
If you know anything about Keynes you know he changed his mind in the face of new evidence, of which, incidentally, you appear incapable.
He did change his mind on this.
It has been the bank’s privilege to print money left, right and centre in recent history and any government which dares to do so has been frowned upon. Apart from the US of course, it even stopped counting it
That was a nice succinct outline from Ann Pettifor that makes a lot of sense. Althogh the quote comes from a daily, I am pleased that we have the web to see alternative points of view as the main stream media seems to be locked in a time warp and churns out the same hackneyed phrases.
Thanks for setting this up Richard you have found some interesting links and quotes.