PKT message, Re: What is Creditary Economics?

Paul:

On the specific point at issue - interest rate and fiscal policy response to
"inadequate" levels of "savings" - I take the Post Keynesian view to be
reflected, inter alia, in Stiglitz' emphasis in 'Globalization and its
Discontents' on the fundamental tenet of the IMF and World Bank approach to
macroeconomic management which, at the end of the concluding chapter on 'The
Way Ahead', he put as follows:

"...the developing countries must assume responsibility for their well-being
themselves. They can manage their budgets so that they live WITHIN THEIR
MEANS, meager though that may be etc. etc." (p. 251)

In the context, "means" does NOT denote available human and natural
resources - instead, it is an amorphous concept relating to the presence or
absence of either domestic price inflation and/or unsustainable external
payments deficits.

That is to say, in countries which fail to "live within their means",
Aggregate Demand exceeds Aggregate Supply.

Hence, when such countries come to the IMF for assistance, the immediate
problem at hand is to "stabilize" the situation by reducing Aggregate Demand
relative to Aggregate Supply (in some cases, such "stabilization" is a
pre-condition for large-scale development assistance by foreign donors and
the World Bank).

Surely, mainstream, monetarist, and post Keynesian scholars all agree (a)
that raising interest rates will increase "savings" and reduce aggregate
demand, and (b) that raising taxes and/or cutting budget expenditures will
reduce aggregate demand.

If so, then the IMF's "stabilization" programs are just what the doctor
ordered!

Gunnar

----- Original Message -----
From: "pdavidso" <pdavidso@xxxxxxx>
To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pktnet@xxxxxxxxxxxxxxxx>
Sent: Saturday, April 12, 2003 10:15 PM
Subject: RE: What is Creditary Economics?

> >===== Original Message From Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
>
> >The traditional mainstream/monetarist/post-keynesian view of "credit" is
> >entirely different, as highlighted by the associated concept of "saving".
>
>
> Clearly Gu nnar you have never read any of my books -- especially
FINANCIAL
> MARKETS MONEY AND THE REAL WORLD -- but going as far back as my 1972 book
> MONEY AND THE REAL WORLD --where finance and money --especially bank
credit--
> is separated from rel resource savings -- after all if money is NOT
neutral
> then this distinction is a necessary conditio!!! -and I have been
arguing on
> this net for years that the Keyn es Revolution involved throwing over
three
> restrictive classical postulatyes-- (1) the neutrality of money , (2) the
> gross sustitution axiom and (3) the ergodic axiom (in stochastic models or
the
> equivalent ordering axiom in determinsitic models).
>
> So Gunnar --do not conflate Post Keynesianism with Mainstream/
Monetarist!!!
>
> Paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 503
> Knoxville, Tennessee 37996-0550
> phone # (561)369-1951; fax #(561)369-1951;
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>
>