Krugman has decried that we live in a dark ages of macro-economics. He's right: basic counter-cyclical policy has been forgotten, and he is correct in attacking the hausterity community. Sadly, he's also part of the dark ages of macro-economics, when he refuses to put the other half of the equation in place. The government, in a down turn, borrows money to restructure the economy. This was the other part of the New Deal: to spread demand vertically and horizontally, and create an economy that could unlock economic energy. For those misty eyed about the new deal, don't worry, this generation will give you a chance to do it again.
Is there a reason, other than political, why the money for stimulus must be borrowed, rather than being created? Money is, after all, a fiction -- a means of symbolizing and tracking the set of promises of goods and services that makes up a working economy. When injected "vertically and horizontally," as you put it, money is motive. It gets the engine moving again, regardless of where it came from.
ReplyDeleteIn mainstream news and analysis, nearly every comment about stimulus policies is accompanied by finger-wagging about the debt, but one almost never hears the idea that stimulus can be achieved without borrowing.
Do you think adequate tools exist to prevent inflation in a nation that has its own currency and that uses this approach?
neo-chartalism is nazinomics.
ReplyDeleteYou print money, you force people to take it. It was then Goering who correctly described the "adequate tool" to prevent inflation.
"The concentration camp is our line of defense against inflation."
Neo-chartalism enjoyed a boom as MMT a couple of years back, until it dropped off the radar, because while you can print money, you can't print oil, and the government may want to believe in post-modern money where it is infinitely deferred, the reality is that it cannot be.
Hence the most stable solution set to infinite fiat money is to build a military and take what you want. See the monetary crisis of the Yuan Dynasty, and the Rise and Fall of the Third Reich.
No, this isn't hypoerbole, you are a Nazi. A "national socialist." Not in an ad hominem kind of way, but in a description of your ideology kind of way.
I ask because I'm trying to understand. I'm not advocating that as a solution -- merely describing it in order to get your response and learn better how the system works.
ReplyDelete"Do you think adequate tools exist to prevent inflation in a nation that has its own currency and that uses this approach?"
ReplyDeleteIf you want to understand, first you need to understand what you say. "Adequate tools" means prison camps and the continued expansion of the police state.