Thursday, July 1, 2010

David Blanchflower doesn’t answer the $64k question.

I like and respect David Blanchflower. He has an impressive CV. Amongst other things he is a former external member of the Bank of England's interest rate-setting Monetary Policy Committee. When there is a choice between stimulus and deflation he normally votes for stimulus.

In this Guardian article today (1st July) he attacks the U.K.’s recent deflationary budget decisions. So far so good. Then he ends by advocating further stimulus (i.e. reflation).

This does not answer the obvious question: the conventional way of bringing stimulus is to have government borrow and spend. But the one thing the entire world is trying to do at the moment is REDUCE national debts. Problem.

For the solution see “Musgrave’s Law” in the column to your right.

Even worse is Adam Posen, current member of the above committee. He said that “the UK had no choice but to cut spending because the deficit was so large...”. Hopeless.

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