Global central bankers, stuck at zero, unite in plea for help from governments by Howard Schneider

JACKSON HOLE, Wyo. (Reuters) - Central bankers in charge of the vast bulk of the world's economy delved deep into the weeds of money markets and interest rates over a three-day conference here, and emerged with a common plea to their colleagues in the rest of government: please help.
"Mired in a world of low growth, low inflation and low interest rates, officials from the Federal Reserve, Bank of Japan and the European Central Bank said their efforts to bolster the economy through monetary policy may falter unless elected leaders stepped forward with bold measures. These would range from immigration reform in Japan to structural changes to boost productivity and growth in the U.S. and Europe.

Without that, they said, it would be hard to convince markets and households that things will get better, and encourage the shift in mood many economists feel are needed to improve economic performance worldwide. During a Saturday session at the symposium, such a slump in expectations about inflation and about other aspects of the economy was cited as a central problem complicating central banks' efforts to reach inflation targets and dimming prospects in Japan and Europe...."

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Wallace Klinck comments:
This seems to be nothing more than pump-priming the economy, not with public and private production loans and bank-created consumer debt, with the (acknowledged) futile objective of stimulating economic activity by merely “quantitatively” increasing bank liquidity.   It totally ignores industrial cost-accountancy and its creation of financial costs exceeding consumer incomes.  

By creating more money without providing a means to cancel these excess “cost-push” accountancy-induced costs, inflation will continue to rob the nation of its rightful advantage in lower prices.  

The article talks as though there should be neither "too little" nor "too much" inflation.  This is a specious argument.  Prices should continue to fall with increasing efficiency but under existing monetary policy this can only happen with credit restriction and resultant economic stagnation with widespread bankruptcy.  

Orthodoxy assumes, wrongly, that “deflation” can only mean falling prices accompanied by economic contraction.  The assumption seems to be that “full-employment” is the natural and unquestioned objective of the system and this involves unlimited production increasingly dominated by State conceived and directed projects in the context of a Work-State.  There is no mention of increased leisure.  

In all of this there seems to be no recognition that price can actually be reduced by assisting retailers by and financing lowered prices through credit expansion—credit which is due for cancellation when spent by consumers. The argument is confined to the idea of prices determined by demand relative to the quantity theory of money and  therefore neglects the whole concept of real cost as opposed to financial cost and price.  It makes no consideration that real cost is measurable by real consumption and that the financial system should reflect this objective fact.  

By introducing new money into being for state projects it appears wrongly  to assume that only through labour should incomes be distributed.  This fails to deal with the increasing effects of labour displacement by modern technology and ignores the whole question of this resulting in what should be an automatic inheritance for all citizens.  In this sense, the proposal appears fascistic or statist in conception.  

We need required infrastructure to be sure, but we don’t need continuing monuments to the glory of politicians and “Glorious Leaders.”  All new production should be financed by new credits.  The costs of production should be recovered via consumer prices, but the consumers are inherently deficient in purchasing-power in the orthodox price-system--and this inadequate “cash” income must be augmented to cover all financial costs emanating as prices.

The Social Credit Consumer Dividend and Compensated Price—financed from a properly constructed National Credit Account--are proposed as the appropriate all-around measures to accomplish this end.  The concept of introducing new money without incurring financial debt is insightful but the suggested manner in doing it appears to be unsound.  These are just a few considerations as I perceive them.

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