To my knowledge, this is NOT a classic ABCT (correct me if I am wrong) because much of the intervention was due to fiscal and not monetary intervention. Does ABCT still follow with fiscal intervention? How would you refute the successes of raising taxes, strengthing the social safety net, and increasing government spending?
EXCERPT: " Why have Argentines embraced bigger government? In part because the preceding era showed how poorly austerity measures — the sort now being pushed by conservatives in the United States — promote growth. In the late 1990s, Argentina cut government spending drastically on the order of its lenders at the International Monetary Fund. Predictably, between 1998 and 2002, Argentina’s economy shrank by almost 20 percent. It was only after Argentina turned its back on these austerity demands, and defaulted on its debt, that it began to recover. "
“It is a classic ABCT. I just posted an answer to it here.”
I would beg to differ. I do not see any evidence of central bank intervention, only government intervention. ABCT suggests that " business cycles (or, as some Austrians prefer, “credit cycles”) as the inevitable consequence of excessive growth in bankcredit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings."
Key words are central bank, interest rates, and credit creation.
They article does not cite those factors, rather, it cites government fiscal policy. TMK, fiscal policy is not part of ABCT.
“Inflation is a result of companies being unable to meet consumer demand and should be resolved by boosting loans for production, Mercedes Marco del Pont, the current central bank president, says. She plans to increase the money supply by 28 percent this year to accommodate economic growth, a move she says won’t affect inflation.”
Are you implying that 25% inflation and 28% increase in money supply are simply results of fiscal policy, i. e. caused by taking more from Group A and giving it to Group B?
Yes the article does cite monetary factors, BUT, that is for future actions, not the past actions which (allegedly) yielded the growth (tax + spend by the government.) The increase in money supply is to (allegedly accomodate) economic growth of the past.
I am saying that, as the article suggest, growth was caused by fiscal policy alone, not monetary policy. Fiscal policy alone would be totally Keynesian. Monetary policy is not Keynesian at all.
You call “growth” a 9% nominal GDP increase under 20%+ inflation and 20%+ increase in money supply? Both money supply and inflation have been high for a while there. It was the central bank president that was quoted in the article about her having to keep increasing the money supply in order to support “growth”. It’s textbook Keynesian crap. Textbook ABCT.
Keynes was an advocate of fiscal policy, i.e. government spending, NOT monetary policy, i.e. monteary inflation. In fact, iirc, he stated that monetary policy would be ineffective to stimulate the economy.
Monetary policy is more akin to the Chicago School and Post-Keynesians, but not Keynesian in itself.
Assuming it was an increase in the money supply, this is not “textbook Keynesian crap.” But it would be textbook ABCT.
Assuming it was both an increase in money supply and an increase government spending (as is usually the case), then it’s both textbook Keynesian crap and textbook ABCT.
"Wheylous: 1) Argentina pegged its currency on the US dollar, essentially a type of monetary policy."
Thanks Wheylous. This is the type of information I was looking for in regards to understanding if Argentina’s “success” was due to monetary or fiscal policies.
“z1235: The very monetary/fiscal dichotomy is Keynesian crap in its own right.”
I’d beg to differ. Keynes had a specific “formula” for when to use fiscal and monetary policy. Fiscal policy for times of recession/depression, monetary policy for “normal” times. It is apt to acknowledge the nuance as to not build a straw man argument.
From the same wikipedia article:
“The latter opens the possibility of regulating the economy through money supply changes, via monetary policy. Under conditions such as the Great Depression, Keynes argued that this approach would be relatively ineffective compared to fiscal policy. But, during more “normal” times, monetary expansion can stimulate the economy.”
“The latter opens the possibility of regulating the economy through money supply changes, via monetary policy. Under conditions such as the Great Depression, Keynes argued that this approach [monetary policy] would be relatively ineffective compared to fiscal policy. But, during more “normal” times, monetary expansion can stimulate the economy.”
To add clarity, they may be a difference between Keyensian Economics as in the adherents and advocates that derived from Keynes, and Keynesian Economics, the arguements that came from Keyens the man himself.
OK, perhaps we’re not speaking the same language (English) here. How does Keynes’ opinion about the ineffectiveness of monetary policy “under [certain] conditions” refute the position that Keynesianism includes both monetary and fiscal policy “solutions”?