The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Sunday, July 18, 2010

More on Scottish mathematician and gambler, who advised Regent of France

The first post is here. And enclosed is another excerpt:

"A hot day in London gave me a good chance to sit in the cool of the London library and read more about John Law. In some ways the father of modern economics, the Scottish mathematician and gambler was an adviser to the Regent of France, who struggled to repair the nation's finances, ruined in the wars of Louis XIV.

Law didn't really invent the monetary stimulus, since monarchs had been creating money for thousands of years. But they were doing it simply to fill a hole in their budgets. Law needed to do that too, but believed that a shortage of credit was inhibiting trade. Create more money and there would be more trade, and thus more wealth for everyone including the government.

Whereas money was previously seen as a store of value, Law saw it just as a medium of exchange...

In a sense, Law's arguments still echo today, as one can see from the responses to my last post on the stimulus debate. There is a shortage of demand (trade) so create more money (debt) say the Krugmanites/Keynesians; nonsense, comes the answer, the only result will be to create money that is worth less and debt that will just burden future generations. John Law would side with Professor Krugman; the stimulus package will create more wealth, allowing us to service those debts."