Nature is not natural and can never be naturalized — Graham Harman

Thursday, September 17, 2015

"Printing Money"

This was an idea scoffed at on the BBC two days ago. Why? Because Jeremy Corbyn is not a monetarist. No one seems bothered to remember, including the supposed guardian of supposed British culture (at least that's what they were charged with when they were created). Look:

1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond.

2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.

3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down.

4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses. --Paul Krugman

1 comment:

John said...

A bit of the old Keynesian print money business. Right. Krugman cleverly anticipates criticism by noting this can be ineffective in an interest rate ditch when there are already too many dollars chasing alpha to make a policy orchestrated difference. In fact, under such circumstances plus high debt ratios that we have now, printing money is not the greatest of ideas whether one's politics are left or right. The opposite strategy is also wrong for the opposite reasons and this was actually tried as shock therapy in South America in the 80s/90s by Los Chicago Boys (Is it really a coincidence that both Milton Friedman and Martha Nussbaum were at the same institution as different heads of the same Hydra? One might also add Cass Sunstein into this except that he smiles and has better PR) If money is printed, it would better be used to dig us out of neoliberal hell by paying down debt and combined with structural reforms to encourage full employment such as eliminating free trade agreements and taxing capital migration and heavily taxing all short term investments to reduce financial speculation, boost employment and produce budget parity as needs may be.