Left Outside

Curse you Luis Enrique!

Left under a post of mine at Liberal Conspiracy

I would love to her from someone who understands the theory better. Luis Enrique, are you there?

I can’t help but feel unwanted.

Filed under: Blogging, , , ,

Printing money is okay, we do it all the time!

A lot of people get very worried by printing money. We can trace this line of thought back to the great political economists of the nineteenth century like JS Mill, but it finds itself common on the left and right these days.

You can print yourself into hyperinflation, or even accelerating inflation which can eat into living standards and cloud relative prices. But you can find yourself in deflation by failing to print enough. It is this second problem we have been closer to.

It is sad that people need reminding that hyperinflation impoverished Germany but it was relatively mild reflation which pushed them towards fascism. It seems sensible to me to fear deflation more than inflation. Better yet to find the happy medium, where the economy operates at its potential without prices rising too quickly or people being left on the scrap heap of unemployment.

Unfortunately I don’t know where to get the data for the UK, the UK National Statistics website is a joke, but here is some data for the US showing the potential for disconnect between money and prices.

For two decades, money increases along with economic activity, prices increase more slowly (i.e. we got richer). We reach 2008 and the monetary base explodes but prices do not. In fact, prices fall slightly just as the monetary base grows at over 100% a year.

What does this tell us? It tells us that simplistic talk about “fake credit”, “titanic disasters” or “defy[ing] economic gravity” is very wide of the mark indeed.

Quantitative Easing causes a lot of confusion. Normally a central bank promises to print as much money as is necessary to pin short term interest rates at a level predicted to produce stable prices and full output.

Around the world, our last crisis was so severe that short term interest rates went to zero and stayed there. The central bank’s method for controlling prices and output was suddenly impotent.

QE is an extension of this normal promise to print and spend to long term debt because rates on short term debt have already been pushed as low as it is possible to go.

QE is far from ideal, in fact it is the least a central bank can do once rates hit zero. But it is the only option currently on the table because many people currently resist a central bank even doing this minimum because they seem not to care about unemployment.

If you support more active policy to help people then it has to be both through QE and after QE. Only by supporting a suboptimal policy will the space ever open up for something more efficient for boosting growth but that is less popular with central banking’s elite.

Filed under: Economics, Politics, , , , , , , , , , , , , , ,

When NGDP is Depressed, Employment is Depressed

Subscribe to Left Outside

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 8,322 other followers

RSS D Squared Digest

  • An error has occurred; the feed is probably down. Try again later.

RSS Stumbling and Mumbling

RSS Britmouse

RSS IOZ

RSS Phil Dickens

RSS Guardian: Global Development

RSS Steven Baxter

  • An error has occurred; the feed is probably down. Try again later.

RSS Jack of Kent

RSS Suggy’s Blog

RSS A Don’s Life

RSS Adam Smith Institute

  • An error has occurred; the feed is probably down. Try again later.

RSS Alex Massie

  • An error has occurred; the feed is probably down. Try again later.

RSS A Very British Dude

RSS Thomas Byrne

  • An error has occurred; the feed is probably down. Try again later.

RSS Heresiarch’s Dungeon

  • An error has occurred; the feed is probably down. Try again later.

RSS Paul Krugman

RSS David Beckworth

RSS Kantoos Economics

RSS Duncan Black

RSS Noahpinion

RSS Knowing and Making

RSS Ta-Nehisi Coates

RSS Will Wilkinson

  • On the SOTU
  • What This Guy Says about Inequality Will Make You Stand Up and Cheer (or Puke)

RSS Unlearning Econ

RSS Jared Bernstein

RSS Acemoglu and Robinson

RSS Mark Thoma

RSS Overcoming Bias

RSS Baseline Scenario

RSS Macroeconomic Advisors

Increase NGDP, Put These People Back to Work

Follow me on twitter

April 2014
M T W T F S S
« Mar    
 123456
78910111213
14151617181920
21222324252627
282930  

Archives

Politics Blogs

Testimonials

Paul Sagar

Left Outside is always worth a read for passionate, and frequently irreverent, analysis and comment.

Sunny Hundal

Oi! Enough of the cheek!

Chris Dillow

Left Outside is, I think, entirely wrong

John Band

This might be the least well informed piece I’ve read on LC, which is quite an accolade.

DEC Appeal

License

Creative Commons License
Left Outside by Left Outside is licensed under a Creative Commons Attribution 2.0 UK: England & Wales License.
Based on a work at leftoutside.wordpress.com.
Permissions beyond the scope of this license may be available at http://wp.me/PvyGQ-gt.

Follow

Get every new post delivered to your Inbox.

Join 8,322 other followers