It's strange-he is about as a big believer in fiscal stimulus right now as you will find, yet he insists he's not a Keynesian. I don't know if Keynesians are held in low esteem in Japan but he insists on this.
This is someone who says that the money supply only increased in Japan during its stagnation thanks to fiscal policy-while he says QE had no effect. His argument is that what constrained the Japanese economy-our economy after 2008-is not a lack of liquidity-banks are unwilling to lend-but a lack of willing borrowers. So what the government does with fiscal policy is not be the lender of last resort but the borrower.
His history of Keynesianism vs. the belief in monetary policy-basically Monetarism-is certainly very idiosyncratic. He says that:
"The renewed interest in monetary policy and the poor record of fiscal policy from 1945 to the late 19702 have also prompted numerous academic reexaminations of the Great Depression over the last twenty years. In light of the poor performance of the fiscal policy from 1945 to 1970, it was felt that perhaps too much credit had been given to teh role of fiscal stimulus in pulling the U.S. out of the Great Depression."
http://www.amazon.com/Holy-Grail-Macroeconomics-Lessons-Recession-ebook/dp/B006ES4UX0/ref=sr_1_1?s=books&ie=UTF8&qid=1394295057&sr=1-1&keywords=richard+koo
I'm actually reading this on the Amazon Kindle so the page is 1801 out of 7542 which is 24% into the book. I which or there was a way to cut and paste quotes from the Amazon books rather than having to right it out word for word. As there isn't I'll just summarize the rest here. He goes on to say that the what had given the impetus to the belief in fiscal stimulus was the success it was believed it had in ending the Depression through FDR's New Deal policies.
This history less is strange on many levels. For one thing, FDR really wasn't a Keynesian. Most of those years despite all the seeming firepower of the WPA, the CCC, the PWA, etc. there was not a large deficit. FDR believed in balancing the budget, unfortunately. As Krugman says fiscal stimulus really hasn't even been tried-WWII obviously wasn't done as a fiscal stimulus, and even Obama's stimulus was short lived with a contraction the last 4 years.
What I really don't get is how he can claim that fiscal policy was discredited based on its poor performance from 1945 to 1970. That period is still the greatest golden age of capitalism yet-whether you're talking about the U.S.'s economic performance in that period or Japan's-in terms of growth, productivity, upward mobility, etc. Japan regularly saw double digit growth during the period-no doubt it had lot more of room to grow as it was't yet a first world nation at the time. Still I don't see how this period could have been said to have discredited Keynesianism.
It's true that there was the rise of inflation in the 70s and this was used to discredit Keynesianism. I still would take the period of 1945 even to the late 70s including The Great Inflation over what we've had restarting with the early 80s. The high point of that era-the late 40s till the early1970 was better than the Great moderation of the early 80s till 2007. While the GI years were problematic in many ways they gave most people a much higher standard of living and quality of life than what we've had since 2008. I'd take the 70s over the period of 2008 till the present.
So Koo's history is off. Still his balance sheet recession idea can't be sneezed at anymore.
This is someone who says that the money supply only increased in Japan during its stagnation thanks to fiscal policy-while he says QE had no effect. His argument is that what constrained the Japanese economy-our economy after 2008-is not a lack of liquidity-banks are unwilling to lend-but a lack of willing borrowers. So what the government does with fiscal policy is not be the lender of last resort but the borrower.
His history of Keynesianism vs. the belief in monetary policy-basically Monetarism-is certainly very idiosyncratic. He says that:
"The renewed interest in monetary policy and the poor record of fiscal policy from 1945 to the late 19702 have also prompted numerous academic reexaminations of the Great Depression over the last twenty years. In light of the poor performance of the fiscal policy from 1945 to 1970, it was felt that perhaps too much credit had been given to teh role of fiscal stimulus in pulling the U.S. out of the Great Depression."
http://www.amazon.com/Holy-Grail-Macroeconomics-Lessons-Recession-ebook/dp/B006ES4UX0/ref=sr_1_1?s=books&ie=UTF8&qid=1394295057&sr=1-1&keywords=richard+koo
I'm actually reading this on the Amazon Kindle so the page is 1801 out of 7542 which is 24% into the book. I which or there was a way to cut and paste quotes from the Amazon books rather than having to right it out word for word. As there isn't I'll just summarize the rest here. He goes on to say that the what had given the impetus to the belief in fiscal stimulus was the success it was believed it had in ending the Depression through FDR's New Deal policies.
This history less is strange on many levels. For one thing, FDR really wasn't a Keynesian. Most of those years despite all the seeming firepower of the WPA, the CCC, the PWA, etc. there was not a large deficit. FDR believed in balancing the budget, unfortunately. As Krugman says fiscal stimulus really hasn't even been tried-WWII obviously wasn't done as a fiscal stimulus, and even Obama's stimulus was short lived with a contraction the last 4 years.
What I really don't get is how he can claim that fiscal policy was discredited based on its poor performance from 1945 to 1970. That period is still the greatest golden age of capitalism yet-whether you're talking about the U.S.'s economic performance in that period or Japan's-in terms of growth, productivity, upward mobility, etc. Japan regularly saw double digit growth during the period-no doubt it had lot more of room to grow as it was't yet a first world nation at the time. Still I don't see how this period could have been said to have discredited Keynesianism.
It's true that there was the rise of inflation in the 70s and this was used to discredit Keynesianism. I still would take the period of 1945 even to the late 70s including The Great Inflation over what we've had restarting with the early 80s. The high point of that era-the late 40s till the early1970 was better than the Great moderation of the early 80s till 2007. While the GI years were problematic in many ways they gave most people a much higher standard of living and quality of life than what we've had since 2008. I'd take the 70s over the period of 2008 till the present.
So Koo's history is off. Still his balance sheet recession idea can't be sneezed at anymore.
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