Wednesday, September 29, 2010

I'll try again

Krugman of 29 September, quoting Adam Posen:

We will only know we will have done enough with QE [quantitative easing] or other monetary stimulus when we have clear indications that our policies are moving the desired variables — market interest rates, wages, output, employment, and inflation expectations — sufficiently and in the right directions on a sustained basis.

In other words, the central bank will (or should) continue increasing the quantity of base money until the quantity of M1 money starts to climb.

By that time, buddy, it's gonna be too late.

If you want to increase M1, then increase M1 instead of messing around with base money. If you're gonna print a trillion, then use it to pay off a trillion dollars of existing debt, so that the people who owe that debt don't have to subtract a trillion from M1 by paying it off, themselves.

Does that make any sense at all?

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