Michael Mussa Obituary

Michael Mussa, chief economist of the IMF during the various crises of 1991-2001, died this week.  This WaPo obituary provides a brief but interesting account of his tenure.

2 replies on “Michael Mussa Obituary”

Alan Blinder makes a pertinent point on when a country just cannot borrow.

Who could think ‘austerity’ is fun but it’s always easy to be against unpoplular measures while having to alternative solutions.

“One of the points Mike Mussa was making, a correct point by the way, is that once a government has gotten to the point it can’t borrow any longer, it must balance its budget. Balancing a budget in a recession may be a bad fiscal policy idea, as Stiglitz and many people have said. But if you literally can’t borrow any longer because you’ve lost credit worthiness in a crisis, there isn’t any choice unless someone comes and bails you out, including the IMF.”

That was a self serving and incorrect statement – as long as there is credit money in the system that you choose to respect as money then you cannot balance the budget.
You can only balance budgets in full money systems.
The money supply must always rise in such a fiat system – if it takes the domestic CB to defecit spend (produce more base money then so be it).

If you do not – you get a internationally overvalued currency with a subsequent misallocation of resourses in the domestic economy.
Ireland is a classic case – with oil imports in Euros rising to perhaps their highest level ever last year which subtracts from the domestic money supply leaving little money to pay private debt obligations or buy domestic goods & services.

The western rail example is a classic microcosm of what is going on at the ground level.
The lack of MMT or even a more basic understanding of the debt system & how the two different types of money interact with each other among international & our domestic economists is quite simply stunning.
Meanwhile classical monetarists like Moore Mcdowell lecture us on efficient resourse allocation !!!!!!! – when their policies have given us the Irish Built envoirment we all Know & love…………….
Give us all a break please – no more Monetarist dogma , it was just a child of US CB war making.

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