One-Month Money — Frequently Asked Questions

What is One-Month Money about?

One-Month Money (buy from Amazon UK, Amazon US, Harriman House) is divided into two parts. Part One — ‘The Case for Change’ — explains why our current economy is inherently unstable, and why our tools of fiscal and monetary policy can only ever hope to moderate, but never eliminate, this instability. This section ends with an explication of secular stagnation in developed economies. Driven by a structural decline in workforce growth, secular stagnation will make our current remedies, already inadequate, even more so.


When savers are the enemy of the economy

Larry Summers put it best in a speech delivered yesterday at the London School of Economics:

“We need to move beyond the Calvinist idea that more savings is always good and borrowing is bad because what we have right now … is a chronic excess of saving and at least judging by the market evidence it’s likely to be with us for some time to come.”

To read why neutral money would solve the problem of excess savings, please see the article just posted on my publisher’s website.

To Stimulate or not to Stimulate

Keynesians like Paul Krugman and Simon Wren-Lewis have been working overtime in defence of their beliefs. The anti-Keynesian attack began before Christmas, when U.K. Chancellor of the Exchequer George Osborne wrote in the WSJ that Keynesians wanting more spending and more borrowing “were wrong in the recovery, and they are wrong now.” The attack continued when John Cochrane penned a WSJ opinion piece denouncing the efficacy of government stimulus. In it, he pointed to the fact that the US has grown despite austerity as proof that deficits are not only useless but harmful.

Is the decline in the US participation rate a result of secular stagnation?

One question I struggled with in my book was how secular stagnation would manifest itself. Would the unemployment rate stay perniciously high? Or would the symptoms be subtler: a low unemployment rate, for instance, combined with a low participation rate?

The Twitter discussion surrounding the latest US jobs report has reignited my internal debate. So I thought I’d share it. For me the key question is this: what if the declining participation rates, shown in the chart below, are actually a result of secular stagnation? What if the US economy has become incapable of employing as many willing workers as it once could?

The Case for the Helicopter Drop

In my book, I explore the efficacy of our various forms of “stimulus,” which are usually broken down into monetary stimulus (lower interest rates and QE) and fiscal stimulus (deficit spending, tax cuts, and redistribution.) Another type of stimulus, which blurs the line between monetary and fiscal, is for the central bank to inject newly-created money directly into people’s bank accounts. Instead of swapping money for government debt, as with QE, the central bank would hand out money for free. This is a new, untested, and highly experimental form of economic stimulus, and because it wasn’t receiving mainstream coverage at the time I was writing my book, I didn’t explore it in great depth. So I thought I’d share a few thoughts now.

Is secular stagnation closer than anyone thinks?

My publisher has posted an article on their website. Click here to read.

Richard Koo: Meet Secular Stagnation

Richard Koo’s latest book, The Escape from the Balance Sheet Recession and the QE Trap, hit book stores in November. In this book, Koo returns to the same theory he explored in his previous work, namely that Japan, and possibly much of the developed world, is suffering from a balance sheet recession. I’m particularly interested in this theory because of how it relates to secular stagnation.

What exactly is a balance sheet recession?