To stimulate the economy, create new jobs and generate new GDP requires an injection of new money. Borrowing from the bond markets or off-balance-sheet in public/private partnerships won’t do it. If Congress won’t issue money directly, it should borrow from banks, which create money on their books when they make loans.
I'm beside myself after reading this article. How can someone spend an entire article arguing for the government to print money in order to support government spending, and not mention the "inflation" EVEN ONCE in the entire article!? I'm incredulous. The amount of intellectual dishonesty by that lack of action is reprehensible. It's like writing an article advocating for a $10 trillion infrastructure plan and never mentioning the word "debt." Incredible.
More often than not, inflation goes hand in hand with wage growth. Putting people to work, building infrastructure, and having inflation finally getting back to more normal levels, are generally good things. Of course there are all kinds of potential problems here with poorly targeted infrastructure spending, public commons turned into private enterprises, government income losses, for starters. I'm not an economist and, for the most part, do not see much difference in the funding mechanisms suggested. I would think that pushing somewhat more money through small banks as loans (or created money) is probably a good idea if the banks at least assume a bit of risk.
I vividly remember watching JK Galbraith debate Milton Freedman and how grateful I was that Mr. Galbraith could so clearly describe the intricacies of Keynesian Economics. I see Ellen Brown in a very similar light. Thank you Ellen.
FDR was very aware of the possibility of graft in The New Deal and his public works projects were relatively free of corruption. I guess we'll see just how honest a Trump administration can be by comparison...
Since corporations are now considered "persons" under Citizen's United decision in 2010, lets have this government tax those same businesses at ordinary income rates.
Re the crumbling infrastructure, polluted lands and rivers, out of control corruption, who outside of any government is going to right those injustices unless there is "profit" involved.
Some profits are not immediately recognized such as a government's (the people) investing in their own "commons" because short term visionaries like businesses require maxed out profits to satisfy shareholders regardless of the damage done to the country as a whole.
"Society is not a business; it is a pact between peoples and their ruling entities to....."....provide for the general welfare".
We need visionaries in our government, not short term profit succors.
Inflation hurts everyone, especially the poor. When the prices of necessities rise, the poor are the most affected. It is the lack of understanding basic economics that has led to the hyperinflation disasters in Venezuela, Argentina, Zimbabwe and even Germany before the Nazis took power.
There's no such thing as a free lunch.
Somewhere in the 2% to 3% area is a good spot for inflation. It helps the economy grow. No situation is perfect for everyone, but this reasonable amount of inflation is best for the most people. We have been under 2% for many years. No one wants hyperinflation. If we have intelligent, reasonable people in charge, then it's very possible to shape policy for close to the perfect sweet spot. Congress has been the problem for some years now as they have refused to spend a bit extra on infrastructure to give us those extra jobs that would push the economy into a better zone.
Where did you come up with 2% to 3%? In the mid to late 1800s, when our country exploded from a third world to a first world country, we had a prolonged slight deflationary environment. Deliberate inflation just for the sake of inflation doesn't help anyone. It masks the true cost of government spending.
Again, the argument is flawed. Paying for government spending through higher prices hurts the poor.
Inflation isn't some magical devise to permanently improve an economy. Inflation just makes saving money more expensive. Think of a bond. You lend money to an issuer, say Apple Corp. and they pay you back principle plus interest in the future. If inflation rises, the money you'll get back in the future will be worth less than it's worth today. Saving that money by lending it instead of spending it would be quite expensive. You'd be far better off consuming it immediately. In the extreme of hyperinflation, people have to spend their daily wages as soon as they get them or else the money becomes worthless by the next day.
So while some economists will claim we can magically grow an economy through inflation, like quantitative easing, the logic is flawed. What we see is an immediate uptick in spending (out of necessity), but what we miss is that prices have risen so our real wealth has fallen and basic necessities crowd out other spending, and instead of saving money and investing, we've consumed more today, hurting ourselves in the future.
Plus your defense of infrastructure spending is flawed. In a perfect world, the only rational explanation for defending government infrastructure spending is to create infrastructure that is a necessity but that the private sector wouldn't otherwise create on its own. Though arguable, some reasonable examples would include roads and bridges.
That being said, the rationale for a government program should never be to fill some arbitrary job quota. If that was the case, we should just give everyone spoons and have people dig ditches and re-fill them every day.
I've countered the inflation argument in many other articles. I'm always over the suggested word limit! But here are two of many supporting references --
Well, I'll touch on a few points. There is lots of important infrastructure that the private sector is quite unlikely to undertake for lack of a profit potential such as sewer upgrades and non-toxic drinking water systems. There is always lots of useful work to do. For instance, on my farm alone I do not ever expect to totally win the battle with the invasive and detrimental buckthorn. A lot of the useful work does not necessarily come with a profit potential, instead, merely a better environment, for instance. As I said, moderate inflation is usually caused by wage growth as businesses become forced to compete for workers. This makes for a good economy for the majority. Picking out one period in history from well over a century ago is anecdotal non-sense. One must take a good look at MANY periods of economic history. About 2% has generally been viewed as the sweet spot, but lately many economists are thinking slightly higher is needed in today's world. "Inflation makes saving money more expensive" if one saves his money under a mattress. Most of us are smarter than that. A little inflation does encourage people either to spend or to invest in a manner that is likely to outpace inflation. BTW, quantitative easing, in a nation with its own currency, will not cause inflation as long as the economy is pinned against the lower bound. The US has proven this over the past few years. Here in the US, quantitative easing has been necessary because Congress has refused to provide the spending needed to cover the shortfall in demand. Congress did this because the republican Congress insists on winning the BATTLE with democrats, the nation be damned.
This statement is false, and at best, backwards. Inflation is purely a monetary concept. It is caused by an increase in the money supply faster than there are goods and services being produced. As every dollar is worth less, companies are forced to increase prices in order to recoup the same real value in revenue for the same good or service as they were previously receiving. They also will pay their workers more to compensate for the loss in real wealth in the event that wages didn't rise in conjunction with inflation (usually the wage increase is delayed compared to inflation, which further hurts the lower class, whereas the rich can more easily and quickly adjust their investment portfolios accordingly to hedge against unexpected inflation).
So wage growth itself does not cause inflation. The printing of money is the only action that can cause inflation. Note that this refutes one of the arguments against a minimum wage. Some people have claimed that raising the minimum wage causes inflation. But rising wages don't cause inflation. Inflation causes rising wages in order to keep pace with inflation.
Just to reiterate, since you might be missing this concept, if you think that increasing inflation is a good idea because it will increase wages, you have to understand that if the increase in wages is in commensurate with the increase in inflation, the worker is no wealthier than he previously was.
Hey Steve Bannon, why should you guys get to say if and when we do this? The current admin wanted to do this 8 years ago when they took over the reigns from the last trickle down leader, W, but republicans said to hell with America: No Way! What makes it the right thing now? Screw that, and screw you if you think that you get to say it's ok to borrow money to do this now that your boy is in the Oval Office! How do you pay for it now with today's money? Figure that out, and show that it isn't the poor and middle class folks all getting to hold the bill when it comes due and we'll all be behind you.
Better late than never may be OK
I guess, but I for one will ask: how are you paying for it and why is it late? and your answer shouldn't be: because the guy who suggested it before was black!
TOTALLY WRONG! Look at Ellen Brown's 2 links. The US money supply has been increased dramatically for several years with inflation remaining below the Fed's 2% target. In the world, dollars are worth MORE. Please, look at actual evidence before spouting silly concepts.
I read the link. Ultimately the printing of money has to come home to roost. Zimbabwe, Venezuela, Argentina, etc. didn't have hyperinflation from something other than the printing of money. The difference was that the action was far more expansive and quicker.
I completely understand the MV = PY equation. It's what my logic is based off of. Yes, one can change the assumptions so that V or Y increase or decrease in conjunction with M so that inflation doesn't immediately occur. But this is a big assumption. The faster and higher you increase the money supply the far more difficult it is to justify moving V or Y in conjunction with this change. If you could, then Zimbabwe and Venezuela would be booming first world countries.
What you don't understand is that today, when we talk about "printing money," that means simply increasing the money supply with some finger pushing on a computer. If inflation looks like it could move above target, the money supply is simply reduced again by the computer. Since you are obviously interested in economics, why not do some serious study? I'm just an amateur, but I've learned quite a bit since my econ 101 in college.
I disagree that inflation causes anything to grow except for the account balances of the financiers. The basis for the continued perpetuation of inflation is the debt-based, fiat-based structure of our money. Once, it was backed by precious metals that you could receive by trading in a greenback at the bank. Now it's just a piece of linen that costs around $.15 a copy regardless of its printed denomination. And they print whatever they want and play accounting games with it. If you want to know its true value or worth, wait until after society takes a nosedive and try to buy, scratch that, try to barter a meal with it.
OMG! Forbes. Enough said! Buyer beware and consider the source!
Of course Forbes doesn't want anyone even contemplating their reality. And that truth is that once you know someone is just printing their money, you will demand much more of it from them to part with your real, tangible stuff, or to do any labor (invest your time) for their currency.
But hey it all works as long as you, and everyone else believes!
If you have greenbacks and you are cold, you can always burn them to stay warm. If you have gold, it don't burn and you can't eat it.