Chapter 17: A monetary framework for fiscal policy activism
The mind likes a strange idea as little as the body likes a strange protein, and resists it with a similar energy. It would not perhaps be too fanciful to say that a new idea is the most quickly acting antigen known to science. If we watch ourselves honestly, we shall often find that we have begun to argue against a new idea even before it has been completely stated. I have no doubt that that last sentence has already met with repudiation—and shown how quickly the defence mechanism gets to work. (Trotter, 1941). The austerity consensus that holds the Eurozone in a straitjacket is not grounded in any logical understanding of the modern monetary system and deliberately ignores many of the actual options that are available to fiat currency-issuing governments. European politicians and their supporting bureaucracies are paralysed by a destructive Groupthink that defines policies, which are incapable of restoring and sustaining prosperity. This is because their fundamental macroeconomic assumptions are not ground in reality. The aim here is to outline a new way of thinking about the economy, which demonstrates the actual options and responsibilities that apply to modern governments that issue a fiat currency.
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