Tag: economists

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national politics & policies political economy

The False Gospel of the Printing Press

inflation, economist, monetary theory

It’s been a while since I’ve mentioned “Modern Monetary Theory,” popularly known as MMT.

While MMT is not popular here, it is gaining adherents outside the ranks of Common Sense readers like a new Ponzi scheme taking on suckers.

Modern Monetary Theorists go on and on about the gospel of printing money, like they just discovered that the Fed-​and-​Treasury act of borrowing within the banking system isn’t the only way to inflate the money supply.

You can indeed “just print money”!

Granted, the MMTers do a lot of fancy footwork, or silver-​tongue-​work — the closest they get to hard money — to avoid the infamous consequences of monetary inflation, “price inflation” being just one of them. They are so enamored of the money press that they’re like teenagers discovering sex: didn’t you old folks know about this great thing?

It would be comical were it not … inflationary.

At the present moment in history, of course, MMT is in a tricky situation: huge increases in the money supply during the COVID period resulted in no small amount of … huge price increases.

“Whatever you call it, MMT is printing money,” Matt Taibbi just wrote in a terrific May 18 piece, “and no matter how sure you might think you are that it will work, you aren’t, and can’t be. Sure, our leaders have been doing it, printing $4 trillion through multiple rounds of QE and $5.5 trillion more in the CARES Act, and sure, that last spree only inspired about 20% inflation so far. Still, any economist who says with a straight face he or she is sure this experiment won’t end with your kids using dollars as toilet paper is lying.”

Or just engaging in old-​fashioned money-crankism. 

The old get-​something-​for-​nothing racket. MMT’s just the latest form.

This is Common Sense. I’m Paul Jacob.

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ideological culture

The Inequality Problem

Ah, the Paul Krugman Problem! How does Nobel Laureate economist-​cum-New York Times progressive-​blogger come to his conclusions?

The other day, the eminent Scott Sumner noted — in “The power of wishful thinking?” — that in the space of one year Krugman seemed to gain a great deal of certainty about how vital it is to reduce inequality.

Sumner quotes Krugman from a year ago, when he frankly admitted that he’d like to agree with Joe Stiglitz’s thesis about inequality, but just wasn’t able to persuade himself.

Unfortunately, Krugman hasn’t given us a lot of reason to follow his “lead,” his new-​found faith in Stiglitzian equality. Sumner cites a possible “inspiration” for Krugman’s new tune: Krugman’s employer, the New York Times, has, as editorial policy, shifted leftward on such issues. And then Sumner waxes philosophical:

Sometimes an economist will change his view on a single issue because of some new empirical study (although that actually doesn’t happen as much as you’d think, or as much as you might like). But what about when an economist suddenly swings sharply to the left or right on a whole range of unrelated issues?

Many people do go through radical conversions; you can find interesting conversion testimonies of a religious nature, if not so many in political economy.

As for me, the subject of inequality continues to fascinate, like picking at a scab.

I suspect that rising inequality is caused by the very institutions that Paul Krugman regards as bedrock: institutions that redistribute money from one group to another; institutions that regulate behavior for the benefit (we’re told) of the worse off; institutions altogether “progressive.”

Surely there would be more downward mobility for the rich and upward mobility for the poor in a freer society than in a more Krugman-​approved society.

This is Common Sense. I’m Paul Jacob.