,
9 tweets,
2 min read
Read on Twitter
How are we to put idle men, money and machinery to work? by Marriner Eccles, Fed chairman 1934-1948 (after saving his family’s bank from collapse) h/t @M_C_Klein fraser.stlouisfed.org/files/docs/his… /1
“..I am sure we can all agree, namely, that our economic condition, with the existing large volume of men, idle money and idle plant equipment, is unsatisfactory and that a material improvement must be brought about to vindicate and preserve our economic system.” /2
Question is how to maintain a flow of funds sufficient for full employment through private or public capital -> credit creation through banks or public outlays (yes macroprudential and fiscal policy interact!) /3
“Cash holdings withdrawn from the economy by large companies which must slow down the economy” -> think about Google or FB today only that those funds are normally invested in asset markets, driving up prices there /4
“To my mind a policy of government expenditure and investment does not become dangerous in an economic sense until (...) demand has reached a point at which prices are being forced up and a general inflationary condition is threatened.” /5
“No we do not have too much plant capacity but we do have inadequate markets for the products of our present plant” /6
“With the slower tempo of our national growth, and being now a creditor and not a debitor nation in need of capital, we must devise means to enlarge the domestic market for our products. To do this, we need a better balanced distribution of our national income” /7
“We must adopt a program (...) of increasing consumption (..) through the development of old age pensions, health and other social services and, (...) of undertaking increased public investment in useful enterprises of a kind that private capital will not undertake” /8
3 sources of legitimacy to allocate funds in our society: Administrative fiat (Central Bank), democracy (Treasury), market (Banks). Eccles makes one think hard about whether we are combining those in the right way /9 (end)
