The IMF goes rad­i­cal?

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An IMF work­ing paper has received a lot of atten­tion recently – and not for the usual rea­sons. Whereas the IMF is usu­ally crit­i­cised for being dog­matic about free mar­ket eco­nom­ics and effec­tively beholden to the banks, this paper is being both praised and crit­i­cised for want­ing to rad­i­cally reform them.

This clearly isn’t offi­cial IMF pol­icy, but the fact that it has been released by the IMF is note­wor­thy, and the paper deserves care­ful atten­tion. It is an enor­mous paper, not just in length (56 pages of text) but also in the range of top­ics cov­ered, and it will take at least three posts to do it jus­tice. In this one, I’ll focus on its analy­sis of today’s mon­e­tary sys­tem.

Click here for the rest of this post

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • Mich

    Money and addi­tional spend­ing power has been cre­ated pari passu with addi­tional bank debt. Impatient’s spend­ing power has risen, with­out any off­set­ting fall in patient’s spend­ing power.”
    Dream’n! Of course the savers spend­ing power falls (by rais­ing prices), only to be returned when the loan is payed back or an investor takes the loss on the loan when defaulted on (falling prices, oh no! defla­tion!).
    You guys don’t see this? Really?

  • richard hodge

    Steve

    The link aint work­ing for me, which is a shame cos I really want to hear your opin­ion on this paper

  • Neb­bi­olo71

    The full link is here:

    http://www.businessspectator.com.au/bs.nsf/Article/IMF-free-market-banks-debt-Krugman-Minsky-pd20121105-ZQR8S

    By the way Steve, you did a won­der­ful job in Swedish tele­vi­sion (broad­casted yes­ter­day) when you raised the ques­tion about the impor­tance of pri­vate debt, money and banks and the fail­ures of main­stream eco­nom­ics — it will cer­tainly start a lot of dis­cus­sions all around the polit­i­cal and eco­nomic estab­lish­ment!

    The jour­nal­ists also told us that you and Beze­mer were given some data on the swedish debt bub­ble but unfor­tu­nately your opin­ion didn’t really get to the view­ers.

  • That IMF paper is rub­bish. As regards the idea that national debts can be writ­ten off by print­ing money and buy­ing back such debt, that’s not orig­i­nal: I’ve been mak­ing that point on my blog for two years now (as have oth­ers). Indeed that sort of debt buy-back has been tak­ing place on a MASSIVE scale and under the guise of QUANTITATIVE EASING. Per­haps they haven’t heard of QE.

    As regards the idea that we can just print loads of money and use it to write off a sig­nif­i­cant pro­por­tion of pri­vate debts, the effect would be a mas­sive rise in pri­vate sec­tor net finan­cial assets, which in turn would result in ram­pant infla­tion (assum­ing the econ­omy is ini­tially at capac­ity).

  • JKH
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