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(email exchange)

Dear David:

Let me refer you to what I call “Mosler’s Law”: There is no financial crisis so deep that a sufficiently large increase in public spending cannot deal with it.

But the European problem is, who can borrow? who can spend?

Solving that problem is the key – the only key – to resolving the crisis.

Regards, James

>   Professor Galbraith,
>   This is David … I’m a BBC Spanish listener. You told that the European
>   Central Bank has not the same solid structure as the banking system in
>   the States. I want to ask you what does Europe has to do to recover
>   from this crisis? Ok, deliver less credits and mortgages maybe, I don’t
>   know, you know it much better than me. But how the recovery will be
>   seen through a decrease in unemployment? what does Spain has to do?
>   Call me David (only 43)
>   Yours sincerely,
>   David …


7 Responses

  1. That reminds me: I read this on Crooked Timber last week, and forgot to bring it to your attention:


    Quote: (See full post for context)

    [3] I can sort of see how you might make a model of the economy which closed so that the exogenous factor was the desire of bank executives to get big bonuses and everything else followed from that. But it would be a very weird bass-ackwards post-Keynesian model, and I really don’t think anyone actually believes that this would be a good description of the world. Maybe I missed the memo and we all believe in endogenous money these days, but I have scoured the Nobel Laureates list[4] up and down and Warren Mosler’s name is not on it, so I conclude otherwise.

  2. by the way, Prof James Galbraith coined the term ‘mosler’s law’ in one of his last public interviews.

  3. Ah, I missed that – I guess because no one even responded to Warren’s point. That seems to be the way it is, mostly – everybody is bloviating about their highfalutin’ theories, and Warren comes in and says, “No, as a practical matter it works like this.”, and they don’t know how to respond. It’s seems to be: “Don’t bother me with facts when I’m theorizing!”

  4. “the desire of bank executives to get big bonuses and everything else followed from that.”

    LOL! This fits all the bankers and MBA types I know PERFECTLY to a T. They need to go watch that movie “butterfly effect” – yes a few corrupt bankers making decisions at the micro level can blow up the macro world – as they have often done throughout history – way to go Mosler’s Law!! 😉

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