Monetary system not behaving according to textbooks – system is wrong!
In a speech in Maryland on January 7, 2011, one of the US Federal Reserve Governors, Elizabeth A. Duke spoke about current monetary trends in the US. It was hot on the heels of the testimony that the Federal Reserve boss Ben Bernanke made to the US Senate (January 7, 2011). They echoed similar messages. The reality is that the US economy is stagnating with very moderate growth and a very weak labour market. The overwhelming reliance on monetary policy as the saviour (low interest rates and quantitative easing) is misguided and will not provide the spending support that the private sector requires to regain their confidence again. But the interesting point to come from Duke’s speech was her observation that the US monetary system is not behaving according to how the mainstream macroeconomics textbooks (and thousands of orthodox teachers) depict it. That comes as no surprise when it is clear from the perspective of Modern Monetary Theory (MMT) that the textbooks are a joke. But given the monetary system is not “behaving itself” you can guess what all those mainstream professors are out there telling their students. Simple, the system is wrong!