Charles Plosser on stimulus – so wrong, so wrong
12 January, 2013 at 21:55 | Posted in Economics | 8 CommentsAccording 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.
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Because we’re in a liquidity trap, with market interest rates on short-term federal debt near zero. Under these conditions, issuing short-term debt and just “printing money” (actually, crediting banks with additional reserves that they can convert into paper cash if they choose) are completely equivalent in their effect, so even huge increases in the monetary base (reserves plus cash) aren’t inflationary at all.
Krugmans Blog
Comment by marc— 12 January, 2013 #
I just noticed this one. You might want to put it up as well…
Comment by marc— 13 January, 2013 #
There is another idiot in the Fed: Scott A.Wolla. See:
http://bilbo.economicoutlook.net/blog/?p=22316
Comment by Ralph Musgrave— 14 January, 2013 #
http://www.di.se/artiklar/2013/1/18/krugmans-och-ilves-brak-om-krisen-blir-opera/
Twitter-bråket mellan stjärnekonomen Paul Krugman och Estlands president Toomas Hendrik Ilves blir opera. Handlingen kretsar kring Estlands hantering av krisen.
Baltikum, främst Estland och Lettland, brukar lyftas fram som exempel på ekonomier som hanterat finanskrisen bra. Båda länderna genomförde hårda åtstramningar, behöll den fasta växelkursen mot euron och lyckades på några år vända fritt fall till tillväxt.
Ekonomiprofessor Paul Krugman, 2008 års ekonomipristagare, är dock inte imponerad. Enligt honom är återhämtningen sämre än den kunde ha varit och syndabocken de tuffa nedskärningarna.
I juni förra året hade Paul Krugman och Toomas Hendrik Ilves en bitter fejd om saken på mikrobloggen Twitter.
”Låt oss skriva om något vi inte vet något om och låt oss vara självbelåtna, högdragna och nedlåtande. Jag antar att ett Nobelpris för handelsteori betyder att man kan orera om finanspolitik och peka ut mitt land som ett ’ödeland’”, skrev den estniska presidenten bland annat.
Twitter-bråket blir nu opera, skriver nyhetsbyrån AFP.
”Vår kortopera kommer att uruppföras av Iris Oja och Tallinns kammarorkester dirigerad av Risto Joost under musikveckan i Tallinn den 7 april”, säger kompositören Eugene Birman, till AFP.
Stycket är kort och har namnet Nostra Culpa (vårt fel).
”Nostar Culpa är ett 16 minuter långt operastycke som tar upp den gamla ekonomidiskussionen om åtstramning kontra stimulans”, säger journalisten Scott Diel, som skrivit librettot, till AFP.
Comment by davidssonmarcus— 18 January, 2013 #
http://nymag.com/daily/intelligencer/2013/01/treasury-dismisses-platinum-coin-solution.html
Sorry, everyone: there will be no minting of any trillion-dollar platinum coins. The Washington Post’s Ezra Klein reports that the idea, which has been floating around as a hilarious and serious solution to the upcoming debt-ceiling impasse, was officially nixed today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” said Treasury spokesman Anthony Coley.
As Klein points out, Coley’s mention of the Federal Reserve’s role is something that has been largely overlooked during our nation’s often ill-informed discussion of the proposal (it’s easy to get distracted when there are elaborate heist scenarios to imagine.) “For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.” This is a good time to remember that the creation of the new currency would only be legal based on a few sentences of a 1995 measure aimed at encouraging coin collectors, and that taking advantage of Representative Michael Castle’s poor imagination would certainly not honor the intent of the law. (Though, as has been repeatedly pointed out by DI Jon and others, so is Republican threat to hold the economy hostage.)
This leaves us back at un-fun square one. Despite calls from some Democrats to do so, the Obama administration has repeatedly said that the President will not invoke the 14th Amendment to raise the debt ceiling on his own. (Many worry that that solution, like the platinum coin idea, would completely sink the public’s already very weak faith in the prospect of reasonable cooperation between the legislative and executive branches.) So, Congress will have to deal with the debt ceiling the old-fashioned way — unless they vote to turn responsibility over to the White House (“a resolution the Obama administration would happily accept.”)
What’s next on the Hill? No one seems to know. In an e-mail to Business Insider, coin-supporter Paul Krugman asked, “So, are they planning moral obligation coupons/scrip, are they willing to court disaster, or are they just hopeless negotiators? I guess we’ll find out.” The White House itself certainly isn’t offering up any more creative solutions. “There are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default,” said Jay Carney following the Treasury announcement. “When Congressional Republicans played politics with this issue last time putting us at the edge of default, it was a blow to our economic recovery, causing our nation to be downgraded. The President and the American people won’t tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy. Congress needs to do its job.”
Comment by davidssonmarcus— 18 January, 2013 #
Comment by davidssonmarcus— 18 January, 2013 #
http://rt.com/programs/keiser-report/episode-393-max-keiser/
Comment by davidssonmarcus— 22 January, 2013 #
Comment by davidssonmarcus— 22 January, 2013 #