If free markets cannot ‘efficiently allocate credit’, what monetary policy could move us closer to full employment?

Abstract

This paper argues that Orthodox theory is useless as a guide to monetary policy: that money and finance matter; and that enlightened macro monetary policy alone will not end the current stagnation. Looking at the loan process-specifically cases of the discrimination and red-lining-shows why ‘invisible hands’ may not grant credit in a socially acceptable manner. Consequently, a visible hand will be required in financial markets to achieve the quantity of credit needed to move us closer to full employment and the distribution of credit to help us resolve social problems generated by ‘free market’ forces.

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