Sunday, October 17, 2010

What I was doing in 1977

And I'm still saying some of those things:

An economy "is" the interaction of buyers and sellers. The economy is transaction
The problems that were so successfully solved in the 1960s were solved by careful control of the supply of money. Those policies solved the problems of too much money and too little debt. The problems were solved in the 1960s
The solution to inflation is "less money." The solution to unemployment is "more money." ...we use stimulative fiscal policy and restrictive monetary policy at the same time.
The solution to that problem is to do two contradicting things to the money supply. The key to understanding Arthurian Economics is to notice the conflict in policy...
Our government has two major ways to control the amount of money in America. [Krugman] still separates the monetary policy from "the rest" of policy.
If the government were to collect more in taxes than it spent, then the surplus, idle money would be "out of the system." When the government spends more than it collects, thus running up a debt, that debt represents extra money put into the system. Interestingly, it may be that after the economic problem is solved, the deficits will be small enough that printing money could cover them and more, and still not be inflationary.
The solution that has generally been used by our government is to let the direct approach handle inflation; and to use the indirect approach against unemployment. Sometimes you have to stop doing the thing that was always the right thing to do.

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