Re: Re:Much ado about nothing?

From: Beth Webster <e.webster_at_unimelb.edu.au>
Date: 03-02-03

The policy issue about large money supply creation is surely the fear of banana-republic style inflation (assets and goods) and a subsequent break-down of the money-exchange system, rather than whether governments can "print money". The logical corollary to the debate on the use of  large job creation schemes to fight chronic unemployment is whether the monetary stimulus will increase inflation, or raise it to a level where it accelerates endogenously or sets up unsustainable cycles public expenditure. If inflation owes more to supply-driven world commodity prices (ie oil) than money supply growth (within limits), then the printing money is less of a concern. However, one would expect that the causes of asset inflation differs from consumption goods inflation and that assets inflation is more affected by the growth of the money supply than goods inflation.

Beth Webster


At 10:19 PM 1/02/2003 +1000, Peter Kriesler wrote:

We have been increasingly bemused by the controversy about whether a
government can "finance" a deficit by
"printing money" rather than by borrowing. Surely any one who has passed a
first year Macroeconomics course
which included money and banking knows, as Trond and Bill have said that "a
deficit simply means that more high
powered money is created in the period than destroyed."  The reason the
controversy has lasted this long and not
produced as much light as it should is that  participants seem to us to
skate between what a government can do and
what is desirable for it to do. The topic of discussion should be: under
what circumstances is it desirable for a
government to borrow, not whether it needs to.


John Nevile and Peter Kriesler

PS.  I have put in carriage returns, and hope they are hard ones - are
there any other kind? The difference seems to be
in the archives rather than in the e-mail text. Trond, could you make the
archives a table with width=100% to get over the
problem of the never-ending line, or is this an occupational hazard from
dealing with economists?

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Received on Mon Feb 3 03:44:32 2003