tag:blogger.com,1999:blog-8764541874043694159.post3333132309195507529..comments2024-03-29T10:48:38.142+00:00Comments on Coppola Comment: The 'cello approach to monetary policyFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-8764541874043694159.post-6240387535914438002013-02-22T09:53:32.513+00:002013-02-22T09:53:32.513+00:00Frances, I might have to side with Neil a bit in t...Frances, I might have to side with Neil a bit in this instance. I completely agree that fiscal tools should be used as a form of monetary policy but don't see why the central bank should control those tools. <br /><br />As you point out, fiscal policy is inherently monetary and is more capable of constricting excessive lending than merely raising interest rates (unless the CB is willing to go to extraordinary levels). Fiscal policy is therefore more capable of moderating business cycles (success is a different matter). However, fiscal policy generally involves picking winners and losers much more directly. For that reason I think Neil is correct that unelected officials should not be given that (extra) power.Anonymoushttps://www.blogger.com/profile/00720722626969395929noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-12065860200512483122013-02-22T05:03:13.840+00:002013-02-22T05:03:13.840+00:00Before doing so, you might like to read an inspiri...Before doing so, you might like to read an inspiring(??) article by me on the subject:<br /><br />http://www.positivemoney.org/2013/02/positive-money-says-create-money-and-spend-it-mervyn-king-disagrees/<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-56911203038640389442013-02-21T13:30:35.787+00:002013-02-21T13:30:35.787+00:00I will write about "why not", Ralph. The...I will write about "why not", Ralph. The reasons are not to do with economics and much to do with politics - and human nature.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-22282169671735975092013-02-21T13:28:31.948+00:002013-02-21T13:28:31.948+00:00Frances says, “Why hamper the monetary authorities...Frances says, “Why hamper the monetary authorities by denying them access to fiscal tools that would make their job easier?” Why indeed.<br /><br />In fact why not take it a stage further and just merge monetary and fiscal policy: i.e. when stimulus is required, just have the government / central bank machine print money and spend it (and/or cut taxes).<br /><br />That’s the policy advocated by Milton Friedman, Keynes, Abba Lerner, Positive Money, Prof. Richard Werner, the New Economics Foundation, and me. Advocates of Modern Monetary Theory also tend to go for a merged system.<br /><br />I suspect important motive for keeping monetary and fiscal policy separate is that it gives a host of windbags something to witter on about: e.g. economics commentators working for newspapers. And then academics just hate simplicity: it puts them out of work. They prefer the complexity of separate monetary and fiscal systems, rather than simply unifying them.<br /><br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-85304231784414195422013-02-21T13:27:44.437+00:002013-02-21T13:27:44.437+00:00A more interesting way for paying the Stamp Duty m...A more interesting way for paying the Stamp Duty might be Mobinos (www.mobino.com). Maybe a special type of Mobinos, such as Tobinos, could be used? The amount of Tobinos issued could be within the control of the CB. See: www.http://mobino.com/mobino-for-central-banks/polit2khttps://www.blogger.com/profile/08184279620350984044noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-78648953266268053982013-02-21T12:43:17.341+00:002013-02-21T12:43:17.341+00:00Stamp Duty on UK property is massively less than t...Stamp Duty on UK property is massively less than typical levels sur le continent where bubbles, except in Spain (another story) were less bubbly :-) Also all properties typically attract CGT (even owner occupied principal homes, but with an annual amortisation allowance) <br /><br />Realtime payments of Stamp Duty to HMRC as the approved loan is entered into the bank's IT system is more complex than an online PayPal transaction? The nature of the loan data could also be captured for analysis. The amount of the loan granted to the borrower would net of the Stamp Duty.polit2khttps://www.blogger.com/profile/08184279620350984044noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-21507670968660480352013-02-21T12:07:54.633+00:002013-02-21T12:07:54.633+00:00Well, of course there is already Stamp Duty on hou...Well, of course there is already Stamp Duty on house purchases. As the majority of lending is mortgages, you would be hitting the same people twice.<br /><br />More importantly from my point of view, it wouldn't be an "expansion" tax because it would have to remain at the same level irrespective of the amount of borrowing a bank had done. Unless you think the "stamp duty" tax would automatically increase as a bank's lending book increased, which would discourage people from going to it for loans? But how on earth would you police that? We don't have real-time financial reporting. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-1511613128466031572013-02-21T11:48:47.825+00:002013-02-21T11:48:47.825+00:00I think I would have more faith in a Pigouvian tax...I think I would have more faith in a Pigouvian tax effect if the tax were directly visible to the borrower rather than a few people in a small number of banks. Why not introduce a Stamp Duty like tax on borrowing. The proceeds could be used to lever the Pigouvian effect by reducing other taxes such as VAT, Income tax etc., so maintaining economic growth while dampening credit expansion (aka bank assets). The overall effect being neutral in the long run. polit2khttps://www.blogger.com/profile/08184279620350984044noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-70240719809619081312013-02-21T09:57:29.866+00:002013-02-21T09:57:29.866+00:00Neil, I don't agree with you about any of this...Neil, I don't agree with you about any of this, I'm afraid. Automatic stabilisers are not a "fine tuning" response and neither is monetary policy as presently operated. I am suggesting use of fiscal tools as an enhancement to existing approaches to monetary policy, not to replace it. This requires cooperation between central bank and government, of course, since the central bank does not, and should not, have authority to tax. But to ditch monetary policy completely? Absolutely not. You only need to look at the mistakes of the 1960s and 1970s to see why fiscal policy alone is insufficient. Or read Sargent and Wallace's paper. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-42811065989145076422013-02-21T07:22:41.275+00:002013-02-21T07:22:41.275+00:00A more appropriate response is to ditch monetary p...A more appropriate response is to ditch monetary policy as a fine tuning response and enhance the automatic fiscal stabilisers.<br /><br />The central bank should not be in charge. They are not elected to be in charge. The central bank should advise. Politicians should decide - because politicians can be sacked by the people.<br /><br />The problem here is the obsession with twiddling with interest rates and trying to do things indirectly.<br /><br />And I suspect that is to do with the United States fundamental problem with government that lay at the heart of why it was set up in the first place. <br /><br />Here in the UK we don't have that problem. The central bank is owned by HM Treasury - de facto and de jure.<br /><br />Central bank 'independence' from government is just a political choice - like public healthcare. It is not a fundamental constraint.<br /><br />The current operational control structure using a central bank department and a treasury department doesn't work properly. We need a different design.NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.com