An awkward excerpt from a Krugman text

At this link I found the page partly captured in the window below.

Upper left = search info.
Upper right = main paragraph.
Lower middle = more text.

My take-away from the Krugman page: In the late 1970s, early 1980s, the Federal Reserve tried controlling the quantity of money as the way to control inflation. But before long they gave up and went back to the old way: controlling interest rates to control inflation.

What the excerpt fails to point out is that the few brief years that the Fed watched money rather than interest rates are the same few years during which the roaring inflation of the 1970s was finally broken.

I find that very interesting. I'm thinking: Changing the interest rate is the small hammer. Controlling the quantity of money is the big hammer.

I put the one-and-one together myself. Maybe there is more to the story. I'll be looking to confirm it.

The Big T

How to prevent inflation when the Fed prints a trillion dollars.

• NPR reports that "...in the U.K., the ... latest attempt to goose the economy ... calls for the Bank of England to create 75 billion pounds" in new money. And NPR quotes the BBC: "These actions are unprecedented in the Bank's 315-year history but are now considered necessary...." [From NPR's "Planet Money" blog, 11 March 2009]
• Under the headline "Fed Prints a Trillion," on 20 March 2009 Chris Martenson reported: "In a shocking development that I frankly hoped we'd never actually see, the Federal Reserve dropped a bombshell yesterday and announced that it is going to create an extra $1 trillion dollars out of thin air...."
• The Seattle Times reports that the Fed's trillion-dollar decision was unanimous. [Seattle Times, 20 March 2009]

Well, it's happening. And the Internet response to these printing press releases is largely what you'd expect: Inflation, inflation, inflation. I have a different take.