Sunday, July 8, 2012

Bill Mitchell, open-ended

Bill Mitchell:

There should be a plan to reduce unemployment and promote sustainable growth. Whatever the deficit that results once those goals are achieved is the appropriate outcome.

Whatever deficit we end up with is appropriate? I can't believe he said that! What if we are doing something wrong?

What if there is a contradiction between our assumption that printing money causes inflation, and our assumption that using credit is good for growth?

We might unwittingly decrease the money in people's checking accounts and increase the velocity of circulation. We might unwittingly cause an increase in the reliance on credit. We might unwittingly increase financial costs to the point that they hinder growth. We might see growth hindered, and do even more to encourage credit use.

We might have little success with our policies, and we might end up with lots of debt.

In such an environment, the one thing that must be done above all is to correct our flawed and conflicting assumptions. Until we do that, not even Bill Mitchell can design good policy.

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