“The central message is still that, as Keynes argued, fiscal policy is the answer to liquidity traps, financial or political. The arguments against fiscal policy in Japan, so far as I understand them are intellectually fallacious; they would receive failing grades in an undergraduate macro exam.”

"Reflections on Japanese Political Economy" (1999)

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James Tobin22

American economist 1918–2002

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“The historic terrain of macro-economic theory is the explanation of the levels and fluctuations of overall economic activity. Macro-economists have been especially interested in the effects of alternative fiscal, financial, and monetary policies.”

James Tobin (1918–2002) American economist

Source: "Money and Finance in the Macro-Economic Process" (1982), p. 12

“People say monetary policy is easy and quick to implement. It can even be done overnight on the telephone, they say fiscal policy drags out in political and congressional debate in our country. It might take months to implement. But the point is that once fiscal policy is implemented, it might go to work much faster than monetary policy.”

Lawrence Klein (1920–2013) American economist

"Keynsianism Again: Interview with Lawrence Klein", Challenge (May-June 2001)

“Keynes's idea was very simple. Monetary and fiscal policy should have a single goal, jointly pursued, of maintaining a full employment level aggregate demand.”

Robert Skidelsky (1939) Economist and author

Source: John Maynard Keynes: The Return of the Master (2009), Ch. 8 : Keynes for Today

“The usual and basic Keynesian answer to recessions is a monetary expansion. But Keynes worried that even this might sometimes not be enough, particularly if a recession had been allowed to get out of hand and become a true depression. Once the economy is deeply depressed, households and especially firms may be unwilling to increase spending no matter how much cash they have, they may simply add any monetary expansion to their board. Such a situation, in which monetary policy has become ineffective, has come to be known as a "liquidity trap"; Keynes believed that the British and American economies had entered such a trap by the mid-1930s, and some economists believed that the United States was on the edge of such a tap in 1992.
The Keynesian answer to a liquidity trap is for the government to do what the private sector will not: spend. When monetary expansion is ineffective, fiscal expansion—such as public works programs financed by borrowing—must take its place. Such a fiscal expansion can break the vicious circle of low spending and low incomes, "priming the pump: and getting the economy moving again. But remember that this is not by any means an all-purpose policy recommendation; it is essentially a strategy of desperation, a dangerous drug to be prescribed only when the usual over-the-counter remedy of monetary policy has failed.”

Paul Krugman book Peddling Prosperity

Source: Peddling Prosperity (1994), Ch. 1 : The Attack on Keynes

“Economic and monetary union…is incompatible with independent sovereign states with control over their own fiscal and monetary policies. It would be impossible…to have irrevocably fixed exchange rates while individual countries retained independent monetary policies…such a system could never have the credibility necessary to persuade the market that there was no risk of realignment. Thus EMU inevitably implies a single European currency, with monetary decisions…taken not by national Governments and/or central banks, but by a European Central Bank. Nor would individual countries be able to retain responsibility for fiscal policy. With a single European monetary policy there would need to be central control over the size of budget deficits and, particularly, over their financing. New European institutions would be required, to determine overall Community fiscal policy and agree the distribution of deficits between individual Member States…It is clear that Economic and Monetary Union implies nothing less than European Government…and political union: the United States of Europe. That is simply not on the agenda now, nor will it be for the forseeable future.”

Nigel Lawson (1932) British Conservative politician and journalist

Speech to the Royal Institute for International Affairs, Chatham House (25 January 1989), quoted in The View from No. 11: Memoirs of a Tory Radical (London: Bantam, 1992), p. 910.

“Balancing fiscal and monetary policies is a problem. If you do just one thing, it is not necessarily enough—neither monetary policy alone nor fiscal policy alone, and neither tax cuts nor expenditure increases alone. You need to mix policy. By having the right balance, you can get high employment and stable prices.”

Lawrence Klein (1920–2013) American economist

"Keynsianism Again: Interview with Lawrence Klein", Challenge (May-June 2001)

“I refuse to start from the assumption that the role of monetary policy is to control and stabilize inflation. The only acceptable way to start is, I believe, to think of the goal of monetary policy, together with fiscal policy,as the maximization of welfare.”

Olivier Blanchard (1948) French economist

" Monetary Policy; Science or Art? https://economics.mit.edu/files/742" (2006)

“I suspect that many of the world's financial lords are somewhat embarrassed to tell Japan repeatedly at G-7 meetings and elsewhere to adopt a Keynesian solution. Within Europe, central banks and governments think Keynesian theories and policies are absolutely wrong. Despite the remarkable success of pragmatic policies in the United States, true believers in the Invisible Hand reject Keynesian diagnoses and prescriptions. Many observers of Japan have found it intellectually comforting to blame the slump on the plight of the banks, flooded with bad loans dated from the land and equity bubbles and their collapse. They hope that a governmentmanaged and -subsidized rectification of bank balance sheets will trigger overall economic recovery. I think this is a false hope. The bank problem is only a small part of the macroeconomic disaster. It has to be resolved, of course, but resolution that is no substitute for the needed fiscal and monetary stimuli.”

James Tobin (1918–2002) American economist

"Reflections on Japanese Political Economy" (1999)

“Central banks have moved to stimulate spending in the face of this attempt to increase savings by lowering interest rates. They lowered them to the zero lower bound without having much effect; the fall in desired savings was too large. We are in a Keynesian liquidity trap. Central banks have tried to stimulate spending by actively increasing the money supply, raising fears of inflation in many circles. But no inflation has resulted as the cash sits idle in corporate coffers. Even at zero interest rates, business firms are reluctant to spend!
What to do? Many pundits say we must simply endure what they call secular stagnation. This is an unhappy prediction. Much better is the Keynesian insight that this is the perfect time for fiscal policy. In the U. S. again, there are immediate needs to repair roads and bridges, rebuild the energy grid, and modernize other means of travel. Keynesian fiscal policy expansion will benefit the economy in both the short and long run.”

Peter Temin (1937) American economist

Why Keynes is Important Today (2014)

“The Delors report is aimed at a federal Europe, a common currency and a common economic policy, which would take many economic policies, including fiscal policy, out of the hands of the House, and that is completely unacceptable. It would also require a treaty amendment, which we do not believe would ever be passed by the House because of the lack of sovereignty that it would imply.”

Margaret Thatcher (1925–2013) British stateswoman and politician

Prime Ministers' Questions (27 April 1989) https://api.parliament.uk/historic-hansard/commons/1989/apr/27/engagements#S6CV0151P0_19890427_HOC_126 <br class="br">Third term as Prime Minister

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