Duncan’s Economic Blog

From the man who brought you QE…

Posted in Uncategorized by duncanseconomicblog on May 20, 2009

Richard Werner is an academic economist who was previously a well respected financial market economist. He is also the guy who invented the phrase quantitative easing. Although he argues it is misused:

However, and this is a predictable irony of central bank behaviour, they used it is a cover, because they did not adopt true quantitative easing, and instead implemented simple monetarist expansion of bank reserves. As I had predicted, this could not work. Next year Japan will basically be in its 20th year of recession. One further comment: In my English-language articles and interviews that I gave I used the expressions ‘credit expansion’, ‘liquidity expansion’ or ‘credit creation’ (the latter being the most accurate description) instead of ‘ryoteki kanwa’, as the audience in the financial markets would then understand me more or less correctly.

He wrote a book in 2005 that looks very interesting. In fact Ive just ordered a copy after reading this sample chapter.

It not only gives some interesting clues about the situation we face now (wow, a macroeconomist who seems reay interested in the process of credit creation) but also a compelling attack on the neo-classical model so belovedof many. I really recommend the 20 page sample.

Some highlights to get you started:

Proponents of neoclassical policies raised hopes that standards of living

and the quality of life could be improved all over the world, that poverty and

deprivation was going to be a thing of the past. As recent as the 1950s

and 1960s, many economists were convinced that, thanks to the advances of

economics, an era of stable economic growth and ever-increasing wealth and

prosperity had begun and would spread welfare across the world. This is not

what happened. There is very little empirical evidence that poverty, destitution,

disease and economic inequality have been defeated. To the contrary, many

studies seem to indicate that inequality has been increasing.

Economic cycles have not disappeared. On the contrary, there is indication

that the former business cycles may have turned into larger boombust

cycles in many countries. There is evidence that over the past 30 years,

financial crises have increased in number and become more destructive and

menacing in their amplitude.

The promise of stable economic growth, without cycles, has also not been

met. Economic cycles have not disappeared. On the contrary, there is indi-cation
that the former business cycles may have turned into larger boom-bust

cycles in many countries. There is evidence that over the past 30 years,

financial crises have increased in number and become more destructive.

Go read. I’ve not spoiled the best bit which is a well stated case against the concept of perfect information.

Very much looking forward to my copy arriving and will report back.

 

 

 

 

 

2 Responses

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  1. Mr. Mxyzptlk said, on May 20, 2009 at 10:05 am

    I have to be honest Duncan but you have destroyed my life.
    being an ignorant man(i admit it freely) i decided to pull myself
    up by me bootstraps and educate meself.

    Having thought economics was the one thing which could be
    blamed for …well everything.. best start there i thought.

    and so stumbled upon your blog and although enjoyable
    and informative it is..It in no way matches Robert pestons blog
    who is like a god to me i was always transfixed watching and listening to him
    on the B.B.C both on the wireless and TV
    with his sonorous voice and faint half smile flickering
    and dancing around his lips.
    Guiding me through the highway and byways of economics
    (and lying politicos)

    so you can image how you shocked me when
    you suggested after i compared you on TV less favorably
    in the good looks department With Robert.
    That he dyes his hair this acorn of a idea has
    grown into an oak of obsession.

    And am unable now to see Robert on the T.V
    without no matter how hard i try..my eyes being
    inexorably drawn slowly but surely to his tousled mane.
    The other night my wife came into the sitting room
    and said in that shrill voice woman use

    “what you doing”

    to me as i had my face pressed right up to
    our 52 inch TV screen in Order to detect if
    Robert does indeed color his hair.
    ( I am still unsure)
    So i can only hope you are more thoughtful
    on the aspersions you cast on peoples idols
    as it can cause more consernation than
    perhaps you realise .


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