Tom's take on: "Gauging the multiplier: Lessons from history | vox"

What's it mean?

The size of the fiscal policy multiplier – and thus the impact of austerity on GDP – has been a contentious issue since the crisis started. The IMF recently revived the debate by suggesting that the multiplier is much higher than previously thought in the current policy environment. This column discusses independent empirical research that confirms the IMF's view – the authors' estimate of the multiplier is in the range of 1.6.

via Gauging the multiplier: Lessons from history | vox.

Well, it means that you get more bang for the deficit buck when the Fed has less room to move because interest rates are already near zero.

However, the Fed can start charging interest on surplus reserves held by the Fed. That would force more commercial banks to lend. The trouble there though is with the quality of the loans. If you force banks to lend, their standards will have to come down. They may be too high right now, but how low do we allow them to go again before we risk another 2008-like disaster?

Anyway, if we don't do "Too Big To Fail" but take them through controlled reorganization and if we target good-jobs creation with the deficit spending, we can get back on our feet without going the Austrian School private-liquidation, austerity route.

There is a better way yet though, and that's Public Banking with interest-and-debt-free United States Notes under an open-source Monetary Authority that pegs money supply to real productivity in real-time. From there, we've head into a moneyless society, as it is in Heaven.

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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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