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> But the same thing could be accomplished by a much more conventional means: taxation and public spending. * Such policy often comes with substantial lag time
by nickles 7y ago
> But the same thing could be accomplished by a much more conventional means: taxation and public spending.
* Such policy often comes with substantial lag times, as it is implemented via legislation. Monetary policy may be implemented more rapidly.
* Governments are incentivized to provide stimulus during economic slowdowns, but reducing spending and increasing taxes during economic expansions is unpopular and leads to lost elections.
* Public spending is frequently allocated for political purposes, absent consideration of economic impact, potentially leading to malinvestment.
The great inflation of the 1960s to the 1980s was due to such Keynesian policies and was halted by implementation of contractionary monetary policy. Ideally, carefully considered monetary and fiscal policies are implemented and utilized to maximize potential for economic stability.
- candiodari 7y ago> Such policy often comes with substantial lag times, as it is implemented via legislation. Monetary policy may be implemented more rapidly. And because of this we should drop this whole democracy thing ? Parliaments have shown plenty that if the need is high enough, action can be very quick indeed.
- nickles 7y ago> And because of this we should drop this whole democracy thing ? Parliaments have shown plenty that if the need is high enough, action can be very quick indeed. You've constructed a straw man argument. Instead of advocating for eliminating democracy, I highlighted some of the issues with relying exclusively on fiscal policy. An independent central bank can help resolve some of these concerns. Afterwards, I stated there was a need for both fiscal and monetary policy: "Ideally, carefully considered monetary and fiscal policies are implemented and utilized to maximize potential for economic stability."