Increasing public debt is bad for a number of reasons. Journalist Matthew Yglesias, speaking on vox.com, gives voice to a very different, very Pollyannish perspective: “Debt is just not a problem right now,” he says.
Why?
“The U.S. can never run out of dollars.” After all, the Fed can just print more.
That’s not an uncommon view where I live, near the center of privilege, Washington, D.C.
The video starts with an instruction: “Stop freaking out about the debt.” It sports nifty, simple graphics and comforting music. Matt Yglesias sounds convinced himself.
Nothing he says convinces me. But I’ll concentrate just on the frank inflationism.
Yglesias mentions inflation. But it’s obvious he means CPI numbers, even though he offers the short-hand “too much money chasing a fixed amount of stuff” definition to stand in for the “supply of money increasing faster than the demand for money” definition that I hear from competent economists.
But while he admits that price inflation can be a problem, what he is promoting is inflationism. That’s the doctrine that central bank fiddling with increases in the rate of money growth is the way to control the economy. And that it’s costless.
Like money cranks of the old days, he only sees the costs of not inflating the credit system.
It never enters into his ideologically-driven thoughts that maybe artificially lowering interest rates fakes out investors and consumers, getting them to make bad investments that destabilize relative prices that, when they unravel, wreak havoc.
Inflationists are folks who are always trapped by the cure they prescribe. We’re left with boom-bust forever and ever.
This is Common Sense. I’m Paul Jacob.
3 replies on “Not a Problem?”
Short sighted and simplistic.
The abuse of fiat money has perverse and adverse ramifications throughout the economy and moral structure of every individual, city, state, the US and the world.
I am saddened and disappointed in GE’s sponsorship.
The current Federal Reserve policy of “quantitative easing,” which is directly inflationary, cannot solve the problem of Federal profligacy. The Federal government is rapidly spending itself into a corner, from which it cannot extricate itself. If it increases taxes enough to pay the debt, it’ll cause a depression; if it does not, the interest costs of Federal debt will eventually become unmanageable, and only two bad alternatives will remain: Either repudiate the debt, which is disastrous, or inflate it into insignificance, which is not as obviously disastrous. Expect still more monetization of Federal debt in the future, even if by a different moniker from “quantitative easing.”
Pollyanna doesn’t begin to describe it. The policy of regular inflation is no more than a tax that the politicians have , thus far, not been held accountable for, since the public has not made a connection between their inability to pay their bills and that direct hosing that the federal government has applied. It is taxing with out accountability. And it hurts most the very people that the government purports to be helping, the middle class and the poor. They are regularly screwed since the government does not even acknowledge inflation as involving the cost of food and energy, the two main expenses that most Americans face.
The only appropriate comeuppance would be for the people doing this now to still be in charge when they crash it, since historically , the citizenry do not treat well those at the helm when their economy has finally expired from the continued assaults.