Economics

尝试一切手段

Dec 31, 2014 J. Bradford DeLong

伯克利——2008年底，当我意识到全球经济距离曾诱发与大萧条同样危险的崩溃越来越近时，我在震惊之余同时又充满希望。毕竟，我们曾有过类似的经历。而且我们也曾找到过减轻损失的方法；不幸的是，决策者却将其束之高阁。

大萧条开始三年半时间内，美国总统赫伯特·胡佛的首要任务是平衡预算，并竭力恢复企业信心（但他的努力最终没有成功）。1933年，新当选的美国总统富兰克林·罗斯福改变了路线，采取一种简单而激进的策略：尽一切可能刺激需求、增加产量或降低失业率——之后继续重复行之有效的方法。

罗斯福放弃试图平衡预算，增加货币供应并启动赤字开支。他让美国脱离金本位，允许政府直接雇佣工人，并为有可能失去家园的人提供贷款担保。他推动石油行业联盟化，并为打破垄断引入了积极的反垄断措施。

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J. Bradford DeLong

Writing for PS since 2002
247 Commentaries

J. Bradford DeLong, Professor of Economics at the University of California, Berkeley, is a research associate at the National Bureau of Economic Research and the author of Slouching Towards Utopia: An Economic History of the Twentieth Century (Basic Books, 2022). He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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tina lee Jan 24, 2015

Hi, I'm an amateur so pls correct me if I'm wrong in any parts of my thinking thread. Anyway I would like to ask: why are the governments around the world so obsessed with monetary policies, inflation or deflation when the issue here is the fatigue in physical goods or services demand? I like your article here: try everything. Let's throw the objective of balanced budget issues and blah blah out of the window for the moment till we get through the most critical problem, which is to prop up demand. Demand will only be raised when (1) people feel hopeful about their future (and this is a separate issue from expectations of inflation IMHO), and (2) people have income to spend and repay their loans.

Based on what I read, most of the articles pertaining to Europe and previously US have been about bringing interest rates down and this is monetary policies. But who are the biggest beneficiaries from this? The banks, isn't it? And govts don't have much power over the banks if they (latter) choose to sit on the newly-printed money or only loan to people or biz they deem as safe. This is only part of the solution. In fact i feel the basel 3 regulations have exacerbated the growth issue as more banks prefer to be flushed with cash than "assets" in the forms of loans, as nobody knows if debtors will make good of their contracts. And what the banks with these money do NOT do, is to increase aggregate demand from what I see. If I'm a bank, I'm concerned abt GDP growth of course but it's not my job nor do I have the resources necessary to help as far-reaching as an economy should. The loans to biz might help but not enough, in my view.

I'm wondering, what have the governments do for the masses which are those who r trapped with no jobs, no hopeful futures to look forward? These masses are the ones who will determine where our economies will head towards. The financial markets are for the rich, or rather, those with cash or ability to leverage. But the masses do not have such privilege, so to speak.

The unemployment rates in Europe is appalling and I'm not saying Asian's mostly low unemployment rate is anything to be proud of (due to a very high but unquantifiable underemployment within the labour force). So I feel, the most important thing is not abt fixing the interest rates (which itself has a lower bound at zero usually) or flooding the so-called markets, which are so dislodged from the real markets that truly matters to the masses, with money. It's to help the masses get employed or rather, I prefer the word "occupied". We have been fixated with the idea that if people are employed, we can get them to spend.

If corporations which are all about profits, will try everything they can to keep their costs down and slow to hire, there's no incentives we can do to make them hire more liberally unless govts suggest to pay for the extra payrolls which we all know is not humanly possible to do. And even if that's possible, there r limitations.

Back to my preference of term "keeping masses occupied" instead of seeing them as unemployed would-be employees, why not come up with something like EXIM bank? But in terms of subsidies for exporting companies, govts will "subsidise" these unemployed people who have business ideas but no money to start? And if they have ideas that are patentable, do everything in your power to help them make possible and as painless as possible for the inventors. I just found out European patent laws differ from country to country, which is a joke to me. What kind of single market are they talking about when so many things are individualised? The biggest sore thumb that struck me is same currency but individual central banks and fiscal policies.

Bottom line is: stop seeing the unemployed folks as someone to be pushed back into the labour market. Help them to set up biz. Help them to expand the markets. That's why if we do not stop using the term unemployed, the problem of "unemployment" will persist cuz if govts don't change the way they see and do things, we masses most likely wont either. While many people may abuse the subsidies or not take up, I believe encouraging the youths who are supposed to have the most ideas to take this first step is vital. If so many people are already abusing the welfare systems as well-known in Europe, I don't see why we shld be held back cuz of this. It just seems illogical..

We don't need all the youths or "unemployed" to take up this program. We just need enough of them to make an idea work. Say, 1 founder (conservatively speaking) and 5 workers for a small setup. This is why I believe this will work. When one is driven by desperation, they will do things they would never have imagined. Many of our young people's minds have been about getting a good job. But when they see this isn't coming, and with such a good deal from the govt, I don't see why they won't take up if they spend the time to come up w good biz ideas (which of course the govts must approve).

Funding them will be the same as printing money. Except this time, the trickle-down effect I believe will be bigger cuz money printed goes right into the real mkts, instead of the financial markets of different countries thru QE since the rich could move their funds around in the blink of an eye these days.

I look forward to any further suggestions or criticisms, since I already said I'm an amateur. Thank you.
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Michael Public Jan 6, 2015

Good article. Although no mention of that nothing has been done to stop bankers gambling with the public's obligation to bail them out of bad debts. Worrying about how is recover is weak strategy when its a matter of time before something similar happens again.
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Robert Bostick Jan 4, 2015

Recovery must begin by realizing that answers to the following must become the fundamental premises upon which fiscal policy solutions are constructed.

Show Me:
How the government runs out of its own currency.
How the government needs to tax to spend.
How the government needs to borrow to spend.
How spending to achieve full employment leads to hyperinflation.
How deficit spending during a recession is a "bad."
How a balanced budget or budget surplus adds net financial assets to the non-public sector.
How suspending FICA threatens SS.
How suspending FICA does not boost aggregate demand.
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Per Kurowski Jan 4, 2015

Portfolio-invariant-credit-risk-weighted capital requirements which allow banks to earn much higher risk-adjusted returns on equity on what is perceived as “safe” than on what is perceived as “risky” has destroyed the transmission mechanism of bank credit to the real economy. Until this is corrected whatever other support mechanisms used are not going to be able to fully achieve their purported objectives.

By the way, here is my New Year wish for the Western World
http://subprimeregulations.blogspot.com/2014/12/this-is-my-new-year-wish-for-western.html
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Henry Jasen Jan 3, 2015

Too bad that when something is tried and failed, it has already created a vested constituency that will lobby hard to keep it. Without some sort of guaranteed sunset process, try everything results in keep everything; not keep only the stuff that works.
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dan baur Jan 3, 2015

FDR did not try "do nothing" so you don't have a baseline. By my measure, his recovery was a failure seeing how long it took and that it was ended by a war. By the way, is a new "stimulus war" with Russia the goal of the current administration?
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Felix_47 S Jan 3, 2015

Many things have been suggested. I like hte guaranteed annual income concept......and raising taxes ......but the problem is not that we cannot improve the situation.....the problem seems to be more that we will not because any change is going to affect the "deciders" on Wall Street or Congress or those who pay them in Riyadh or Jerusalem. Anything Roosevelt tried would have been enmeshed in endless litigation if it had been tried recently.
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Armin Schmidt Jan 2, 2015

Try everything seems like a good encouragement.
Maybe it can be strengthened by developing a base for contracts between different triers to share costs and rewards.
Example: one nation tries austerity and another tries stimulus spending. The nation that fares better pays the one that fares worse.
Maybe that could also redirect the conflicting forces concerning such an issue, which often seem somewhat the same within every nation. Either citizens's austerity ideas for example, even when implemented in the other nation, would benefit both nations.
Maybe this would also reduce the growth of nationalist thinking triggered by "natural occuring competition" between nations.
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hanno achenbach Jan 1, 2015

What happened to Lance Brofman's excellent comment? Who deleted it?
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Walter Gingery Jan 1, 2015

The truth is that we already know what to do, but the monied interests resist their adoption.
Any discussion of the state of the economy that leaves that out is useless.
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Paul Daley Jan 1, 2015

If you're interested in increasing demand for new goods and services, then taxes on savings and cash balances would make sense. So would increased capital gains taxes to steer demand away from existing assets. That would provide a bit more focus (and a bit more amplitude) for the current monetary expansion.
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