In a recent post on FT Alphaville Izabella Kaminska is positive about this. She goes on explaining how
the investor’s run on safe assets results in negative rates which “destroy the
vital process by which economies form capital, grow and generate employment”.
Skeptical on the power of monetary policy to circumvent such a bad (temporary
but potentially persistent) equilibrium, Keynes envisaged fiscal policy to
intervene.
"It was the
government’s superior capacity to bear risk — not any inherent belief in its
capacity to make better decisions — that led Keynes to advocate greater
state-led investment when the economy becomes gripped by a bubble of fear."
And
something else is worth noticing: financial repression, prominently criticized
by the newly appointed Harvard Professor Carmen Reinhart,
“is no accident. It is
the deliberate objective of a policy designed to curb the demand for liquid
assets and force greater willingness to commit to less liquid forms of
investment.”
So far so
good!
Yet one
statement struck me as pretty innovative. Because the system is (allegedly) completely
overwhelmed with capacity, we need to deploy capital by shifting demand to
non-material assets like human interaction, health care, education etc. Only
then, the author posits, will capital become scarce again and thus positive
yields on investment will be revived.
