Sumner on what fiscal policy really does:
Fiscal policy can’t really do anything in the AD/NGDP area. So what do people like Larry Summers mean when they talk about a preference for using fiscal policy? They aren’t advocating the use of fiscal policy to get the right level of NGDP growth; you can do that with monetary policy. They are not recommending that fiscal policy be used to attack unemployment, they are recommending that fiscal policy be used to attack the private sector. And that’s because they believe that when interest rates are low the private sector is not efficient, at least compared to the public sector.
Unk. I never noticed until just now that the liquidity trap model (promulgated by Krugman, put in practice to no good effect by Japan) succeeds by failing — interest rates never rise, so you need more fiscal spending… and more… and more…
This is why the banner of market monetarism should fly next to every conservative and libertarian standard — arguing money should be tighter effectively arms the socialists with better weapons.
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3 responses to “Petards And Their Hoisting”
debt is deflationary the world debt is over 900 trillion and growing are 17 trillion debt is chump change that is why amerikkka’s puny spending can’t get us out of this depression let alone start inflation wages are stagnet. Just as republicans stoped f.d.r. from spending enough enough to get us out of the depression untill world war two spending not the war got us out! Obama was prevented from spending enough to get us out this time to by republiscum and their spending cuts has kept the econmy from spending its way out of this mess! The sooner republicans are sent to re-education camps the sooner this depression ends!
You want wages to rise? Figure how to get the economy growing at 8% a year.
Government strangles economies and then proposes a government solution. Clever boys.
That’s a common myth ca, but the Depression got *worse* during WW II, not better. All major goods were rationed and half the adult male population was conscripted — hardly prosperity.
If government could spend us into prosperity the Communists would have won the Cold War.