More Sumner Spawn
Matt Yglesias is refining his new idea, after reviewing the list of demands from the Wall Street protestors:
My view is that the best demand of all, somewhat in the spirit of item number 1 but more radical, is “free money for the rest of us.” There are a lot of different specific ways this can be implemented, but the basic shape of things is that the Powers That Be are great believers in the importance of the credit channel to economic recovery and thus have been willing to provide all manner of free money to players in the banking system. Debt cancellation is a form of free money for the indebted. But why give free money only to banks? And why give free money only to the indebted? Why not free money for everyone? “Everyone,” of course, includes the indebted. But it also includes ordinary people who didn’t happen to avail themselves of the credit binge. It’s an idea so good that it sounds almost silly. “Everyone knows” that you can’t just hand out free money to everybody. Except actually you can. Most of the time it wouldn’t be advisable to do this. In the long run money is neutral, and making more money can’t make you more prosperous. But in the short term, free money for everyone impacts prices. Most of the time it would do so in a dislocating bad way, but under today’s circumstances, it would do so in a useful way. I don’t know what the best way to turn this into a slogan is, but the point is that if the different institutions that together constitute “the government” worked together, they could put more dollars into our hands. Creditors won’t like it because doing this will devalue their existing debt claims, but so what.
It’s late and I am just shell-shocked by this. I’ll let you readers suggest reasons that this might not be such a hot idea, in the comments.
Scott Sumner, Yglesias won’t listen to me. Only you can end this madness.
“Creditors won’t like it because doing this will devalue their existing debt claims, but so what.”
To end a paragraph about the government being able to provide everyone with free money in this fashion is simply priceless.
Well well well, for someone who claims to be a Keynesian, I am surprised by Yglesias saying that money is neutral in the long run. See, Keynes himself said (rightly) that money has some use by itself: a purely psychological one. It makes people feel good to sit on money, because it gives a kind of psychological comfort about uncertain future circumstances. So money is not neutral, and there are people do want money just for the sake of having money.
But anyway, it IS a problem when creditors don’t like something, irrespective of how politically profitable it is to posture against them. Back in 1911, there were certain well-capitalized banks that were actually issuing 100 year debt, because they were confident that their claims would not be adversely affected. People who borrowed a loan once did not have to worry about visiting their lender over and over again to renew or reapply for the loan. By contrast, in the uncertain environment of the post-1940 world, it benefits nobody when they have to renew a loan every six months, creditors or debtors both likewise.
“Well well well, for someone who claims to be a Keynesian, I am surprised by Yglesias saying that money is neutral in the long run. See, Keynes himself said (rightly) that money has some use by itself: a purely psychological one. ”
Excellent observation, although you should have added that the Keynesian concept of monetary demand is ultimately fallacious as it ignores the quintessential feature of money: its purchasing power.
However, at least they try to put forth a theory of money demand, unlike the neoclassicists and most Austrians (the non-Rothbardian ones, eg the monetary disequilibrium gang, who are pretty much indistinguishable from the neoclassicists on the issue, except for their obsession with knowledge issues [that really only have connection to the price system under neoclassicist near-equilibrium conditions, the two camps really are “brothers under the skin”, to borrow Salerno’s pithy comment]).
What’s with your creepy obsessions with Sumner and Krugman?
Martin Wolf seems to agree with Yglesias.
http://www.ft.com/intl/cms/s/0/045aab84-e61c-11e0-960c-00144feabdc0.html#axzz1ZTZeZGRZ
Hopefully this signals that even reckless monetary expansion as a solution is gaining ground. If radical expansion becomes popular, maybe at least a modest higher level targeting scheme will come about. Sumner and others tried to warn people that a continued failure to address the demand shortfall through a bit of inflation could lead to more inflation in the future. Maybe this is the beginning.
I look forward to all you ignorant sissies crapping your pants over high inflation policies. Stone age stupidity like Austrianism will be swept back into the dustbin before too long.
David S. wrote:
I look forward to all you ignorant sissies crapping your pants over high inflation policies. Stone age stupidity like Austrianism will be swept back into the dustbin before too long.
You have just completed the construction of your church, David S., and you don’t even realize it. Now your views are quite non-falsifiable. If CPI growth continues to be tame for the next ten years, you will “lmfao” about my ignorant calls for inflation. If, on the other hand, we get hyperinflation, you will “lmfao” about how my gold-standard views have been relegated to the dustbin of history.
Okay, obviously I have to dumb down my comments to you further. Quoting myself above:
“If radical expansion becomes popular, maybe at least a modest higher level targeting scheme will come about.”
It’s time for a reading comprehension lesson. The second part of the sentence, after the comma, mentions a “modest higher level targeting scheme”, which doesn’t mean hyperinflation or even 10% inflation. It may mean a relatively big expansion of the Fed’s balance sheet though. which is different and will cause the clueless to crap their pants.
Is that clear for even you now?
David S. what you wrote is crystal clear. You said:
I look forward to all you ignorant sissies crapping your pants over high inflation policies.
Now, in light of your recent clarification, you are saying,
It may mean a relatively big expansion of the Fed’s balance sheet though.
So I’m glad we’re on the same page now. When Bernanke doubled the Fed’s balance sheet in 6 months, I thought that was a “high inflation policy” and I metaphorically soiled myself. I’m glad you agree with me that that was a high inflation policy. Believe it or not, there are some jokers out there who would deny it!
With all the confusion with the word “inflation”, do you think it would be wise to just start using debasement instead?
It takes a really confident (delusional?) character to build an argument, destroy it yourself, then try and revive it all in the span of one paragraph.
What do you suppose he means by short term and long term? It’s as if he believes the two are separate entities.
Matt is part right: it would indeed be better to just give everyone equal amounts of stimulus money, than to give moral hazard-drenched money to the biggest failures. But that plan is still a bad idea, and just underscores how ridiculously bad the current policy regime is.
I have offered every stimulus advocate the same idea- just write a check for 100,000 dollars to everyone. I promise to spend not only my check instantly, but every other dollar I hold, too. You want a shock to the economy, then put your money where your mouth is. Not a single Keynesian economist has yet taken up the idea, and I wonder why?