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2020-09-15

‘The Deficit Myth’ Critical Review

True, the federal government can spend any amount by simply printing up the needed money (in reality, creating bank reserves). True, our government need never default since it can always print dollars to repay Treasury bonds. 

But if the government prints up and spends, say, $10 trillion, will that not lead to inflation? Ms. Kelton acknowledges the possibility: “If the government tries to spend too much in an economy that’s already running at full speed, inflation will accelerate.”

So how do we determine if the economy is running at full speed, or full of “slack,” with unemployed people and idle businesses that extra money might put to work without inflation?

John H. Cochrane WSJ June 5, 2020 

https://www.wsj.com/articles/the-deficit-myth-review-years-of-magical-thinking-11591396579

Mr. Cochrane is a senior fellow at the Hoover Institution and an adjunct scholar at the Cato Institut


A profound shift is now taking place in economics as a result, of the sort that happens only once in a generation The Economist 23 July 2020

https://englundmacro.blogspot.com/2020/07/a-profound-shift-is-now-taking-place-in.html


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