Federal Reserve Chairman William McChesney Martin famously declared that the Federal Reserve ‘is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.’ This paper uses the punch bowl metaphor to analyse how the Federal Reserve can improve monetary policy so as to deliver shared prosperity with greater financial stability. The problem is the party starts earlier on Wall Street than Main Street, so the Fed may remove the punch bowl before the party reaches Main Street. Ensuring Main Street attends the party requires a new recipe for the punch, new serving rules, and a new punch master. Additionally, there is a deeper problem that the current neoliberal growth model has the economy addicted to monetary punch. Resolving that requires a cure that goes beyond the punch bowl.
Since the prolonged recession in 1980–1982 which laid the basis for the emergence of finance-led capitalism in the US there have been four phases of economic expansion. The first three ended with increasingly severe recessions in 1990–1991, 2001 and 2007–2009. The most recent expansion, which began in mid 2009, has been characterised by relatively low growth and investment has been weaker than in previous expansions. Unemployment has fallen sharply, but many of the new jobs have been in low-paid services. The Trump government's much-touted investment programme is dependent on mobilising private funding but this has not yet been very forthcoming. Moves to relax the tighter banking regulations introduced in 2010, while strongly welcomed by the big banks, have been widely criticised. Key indicators of financial tensions are unusually low, but profitability and investment, which usually serve as leading indicators of the business cycle, have begun to decline and this suggests that the current expansion could be approaching an end.
Eladio Febrero, Jorge Uxó and Fernando Bermejo
Bradley Bordiss and Vishnu Padayachee
We argue in this paper that Keynes's focus shifted from an interest primarily in the world economy up until The Economic Consequences of the Peace (1919), to one focused on the national economy in the 1920s and 1930s, as the world monetary and trade system was unable to deliver full employment to the various countries participating in it. Temin and Vines (2016) argue forcefully that Keynes was interested primarily in the world economy, and we seek in this article to present a view that emphasises Keynes's contribution to national economic policy. Keynes shifted his attention away from the international economic system when it failed to work effectively in the 1920s and 1930s, and towards this economic system in the period 1941–1944, when the time was right to rebuild it. Given the difficulties experienced by the current monetary system, particularly in Europe, we seek to show the value of Keynes's writing on the national economy in the 1920s and 1930s.