January 28, 2008 1:15 am
According to an article in the Financial Times, the head of the IMF, French economist and former Finance Minister Dominique Strauss -Kahn has called for governments with good fiscal balances to run deficit budgets in order to help stimulate the world economy and limit the downturn now underway.This is a long overdue but nevertheless very welcome policy reversal on the part of the IMF which in the past 25 years has bee n a dogmatic opponent of fiscal policy deficits as acts of counter cyclical stimulus.
John Maynard Keynes who along with Harry White of the USA and Louis Rasminsky of Canada were the principal original architects of the IMF and the World Bank would have been very pleased. Somewhere this morning on the south downs near Tilton, his Sussex home where his biographer Robert Skidelsky now lives and where his ashes were scattered after his death and where Keynes suffered his fatal heart attack in April 1946 Keynes' spirit must be joyful.
His vindication(and quite frankly the vindication of a number of Keynes style contemporary economists including myself) has been far too long in coming but it clearly is underway.
Now in keeping with Keynes' s vision it would be a good thing if global policy makers turned also to a reconsideration of global financial regulation including the problem of exchange rates, financial speculation and regulatory oversights that have permitted events like the rogue trader at France's Societé Nationale losing over 7 billion dollars in fraudulent trades in the futures market. President Sarkozy has called for greater transparency in these matters and he is absolutely right to have done so.
There is much good work to be done and we should get at it as soon as possible.
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