Consider this a joint post by myself and Spartacus. He came across the article but for obvious reasons passed it on to me. And the article is Another Volcker Moment? Guessing The Future Without Say’s Law which was posted at Zero Hedge in March. What I find so interesting is not that the phrase “Say’s Law” comes up, which it often has in the past as an anti-Keynesian meme, but this is actually an accurate use of the concept (even though they call it “laws of the markets”). So what did they write?
The explanation for most of the failures behind modern macroeconomic thinking is the substitution of market-based economics by economic planning.
The fact that today’s macroeconomics dismisses the laws of the markets, commonly referred to by economists as Say’s law, explains all. Subsequent errors confirm. The many errors are a vast subject, but they boil down to that one fateful step, and that is denying the universal truth of Say’s law.
Say’s law is about the division of labour. People earn money and make profits from deploying their individual skills in the production of goods and services for the benefit of others. Despite the best attempts of Marxism and Keynesianism along with all the other isms, attempts to override this reality have always failed. The failure is not adequately reflected in government statistics, which have evolved to the point where they actually conceal it. So when an economist talks of economic growth being above or below trend, he is talking about a measure that has no place in sound economic reasoning, and that is gross domestic product.
You would almost think they had been reading my text, since in it you will find not only quite a bit on the vandalism behind low interest rates which is what the article is about, but also quite a bit on the nonsense intrinsic to using the national accounts. More realistically, once people start to wonder what went wrong with the stimulus, they wander back into the economic archives to see if there are any clues to the present that are available from the past – which is why economics remains the only science in which its own history is an important part of the subject itself.
FURTHER NEWS ALONG THE SAME LINES: This, too, has been forwarded to me which fits into the same story. ECB will do ‘whatever is needed’ to raise inflation. These central planners who will make their mates very rich but put the rest of us into serious bother are not about to stop. Really, there is no “theory” for any of this; they just make it up as they go along.
Pushing back against critics who argue he has backed too much stimulus, European Central Bank head Mario Draghi says the top monetary authority for the eurozone will do “whatever is needed” to lift dangerously low inflation.
Draghi’s remark Thursday underlines the bank’s willingness to step up its stimulus efforts — even though they were increased as recently as its last meeting on March 10.
His speech indicated a readiness to rebut criticism from some media and politicians in Germany, the eurozone’s biggest member, who say the ECB’s stimulus is excessive, hurts savers and risks destabilizing the financial system.
Draghi coupled that statement with a call for national governments to take steps to make their economies grow faster, producing more demand for goods and services and raising inflation and employment.
Other than that everything along these lines has already massively failed, what’s the problem?