Four Views

Three excerpts from a post by Ambrose Evans-Pritchard at Telegraph.co.uk:

1. The Administration: More deficit spending...
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track.


2. The IMF: Less deficit spending...
The US authorities ... are opting ... for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.


3. Professor Tim Congdon: More money...
Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.

"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantititave easing.


4. One view from li'l ol' me: Less debt...

Over the last 50 years or more, the growth of debt has outpaced the growth of equity (money) at a geometric rate. An exponential rate. The immediate solution, the best way to restore the balance between debt and money, is to convert some of this debt to equity. Convert debt to money. Monetize the debt. ...

The quickest way out is just to print money and use it to pay off debt. But it's like touching a snake, isn't it? You can't stand the thought of it.

Less debt. I'm not the only guy with this plan. Everybody's trying to pay down debt. I'm just the only one saying let's use policy to make it happen. Here, here's something from Krugman, from the Tinkerbell post:

"I’d like to see the Fed add several trillion to its assets. But central banks are leery of doing this, for various reasons, including the fact that they’re taking on risk."

There's risk associated with debt. So not even the Lender of Last Resort wants to take on too much debt. Fair enough. But there's a simple way out of this mess: Let's not have the Fed buy up debt. Let's have them pay it off. When you pay off debt, risk goes away.

Debt goes away, too, and that's what our economy needs.