Tuesday, October 5, 2010

It's a Balancing Act

Over at The Troublesome Economist, Allan Schmid says

Joseph Stiglitz in his excellent latest book, "Freefall," advocates the creation of a new global reserve currency (ICCs) with "annual emissions."

I don't know about stripping the US Dollar of its status as the currency of international trade. But Stiglitz wants to print money and pass it out. So does Allan Schmid. And so does Warren Mosler. And so, it seems, does Modern Monetary Theory.

So do I. But you can't just print money. You must also avoid the inflation that comes from printing money.

My solution is to print money and use it to replace credit-in-use. I increase the quantity of money, and at the same time reduce the growth of debt. The channel of circulation, if I may be allowed such an expression, will remain precisely the same as before. Inflation, therefore, need not be such a concern.

I do not increase the total of the stuff we use for money, but instead reduce the total carrying cost of that stuff. I reduce the factor cost of money.

I reduce the reliance on credit, and increase reliance on the dollar.

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