Over on his blog, Scott Sumner has been saying “I hope the inflation hawks are happy, this is what tight money looks like” after the big sell-off in the markets when “Operation Twist” turned out to be sterilized. That’s a bit like pointing out the heroin addict going through terrible withdrawal pains and saying to his mom (who checked him into rehab), “I sure hope you’re happy now. That’s what cold turkey looks like.”
Anyway, Bob Roddis sends me this recent post from our good friend Matt Yglesias. I hope Scott Sumner is happy; this is what it looks like when you preach for 3 years that printing money leads to costless prosperity:
There’s no particular reason why monetary policy has to be conducted through interactions between the central bank and a banking system. Or, rather, the reason it’s done this way is historical. Under an older set of institutional arrangements, a central bank was actually a bank and it’s importance derived from its interaction with other banks. But in the modern day, you could do something completely different. For example, Peter Frase notes that from time to time, proposals pop up for a national basic income. You could, for example, have the government send a check for $600 each month to every American citizen. Alternatively, you could have the central bank send a check for approximately $600 in newly printed money each month to every American citizen and vary the exact amount of the check in order to stabilize demand. Or, of course, you could use different numbers.
I’m not sure the politics of trying to do things that way would really work out well in the end, but it’s a potential idea for your humanitarian utopia of tomorrow.