Charles Plosser on stimulus – so wrong, so wrong12 January, 2013 at 21:55 | Posted in Economics | 8 Comments
According to Bloomberg, Federal Reserve Bank of Philadelphia President Charles Plosser yesterday “said the central bank’s record stimulus risks a surge in inflation and may impair efforts by households to repair their finances.”
Trying to stimulate the economy may even prolong the process, if we’re to believe this guy.
I think Plosser might benefit from taking a look at this video and listen to his master’s voice:
In this interesting video Federal Reserve Chairman Bernanke basically says that idle balances don’t chase goods and services and that a fortiori we don’t have to be overly afraid that quantitative easing will spill over into inflation. And – which actually is the most interesting part of the speech – he also confirms the Modern Monetary Theory view that the financing of these operations is made possible by simply crediting a bank account and thereby – by a single keystroke – actually creating money.
One of the most important reasons why we’re still stuck in depression-like economic quagmires is that people in general – including Plosser and other mainstream economists – simply don’t understand the workings of modern monetary systems. The result is totally and utterly wrong-headed austerity policies, emanating out of a groundless fear of creating inflation via central banks printing money, in a situation where we rather should fear deflation and inadequate effective demand.