Heterodox Central Bankers III

Raúl Prebisch (1901-1986)

Raúl Prebisch on the adoption of foreign exchange controls by the Argentinean central bank in 1943:

“This capital [short-term capital] went to further inflate the categories of goods or assets that were already inflated, and did not translate, except in very rare occasions, in a real increase in the production of the country… the measures adopted by the government permit to make an exception, to allow the inflow of these capitals if it is shown that these are oriented towards the increase in real production…” (Obras, 1919-1949 Vol. IV, p. 183; General Manager, Central Bank of Argentina, 1935-1943).

In other words, short-term speculative flows should be constrained, but long-term flows for productive activities are fine.

Heterodox central bankers II

"At the present time we are still in the depths of a depression and, beyond creating an easy money situation, there is very little, if anything, that the Reserve organization can do toward bringing about recovery. One cannot push a string. I believe, however, that if a condition of great business activity were developing to a point of credit inflation, monetary action could be very effective in curbing undue expansion. That would be pulling a string."

Marriner S. Eccles

Chairman, Federal Reserve Board

March 4-20, 1935.

"The factor of unutilized capacity appears to furnish the decisive answer to the argument that if the budget had been balanced the resulting restoration of confidence would in itself have led to recovery. There is nothing in balancing the budget that would lead to an absorption of excess capacity and hence make it profitable for business to increase its disbursements for plant and equipment. On the contrary, balancing the budget, by curtailing the incomes of people receiving money from the Government and by reducing buying power through increased taxes, would heve been expected to decrease demand and hence increase excess capacity."

Marriner S. Eccles

Chairman, Federal Reserve Board

June 8, 1936

Heterodox central bankers

"Our national debt we will owe to ourselves. The cost of interest service and gradual repayment that is collected in taxes from one generation will be paid to the same generation. The debt will be held wholly within the United States and by our citizens. It will present none of the impossible problems that accompany an external debt. If we fail in the future to make democracy worth while, it will not be the size of the public debt that defeats us. It will be because we have not learned how to use these great resources - human and material - to provide full employment and a high standard of living for all our people."

Chester C. Davis

President, Federal Reserve Bank of St. Louis

November 14, 1942