Quote:
Originally Posted by Adder
Related thoughts from Krugman.
Also, read what I said. I said Paul and the author were wrong about the implications of the thought experiment. I said nothing about it's desirability or feasibility.
I also said that the author threw out a lot of coockoo "Austrian" asides about money. |
Of course monetary circulation can go on forever. IF people continue to believe the "green paper" can be passed along to someone else as a form of exchange. IF people believe that green paper will continue to hold value.
I can't foresee any situation in which dollars would drop to Weimar Germany valuation levels. I agree with you that we are not likely to see hyperinflation as a result of current easing. Where I start to question the efficacy of the Fed's moves is when I consider this formula:
Easing + Continued Lack of Employment = ?
High unemployment is a new normal. The majority of jobs here being of a low wage service sector variety is a new normal. Easing will make the debt burden held by many Americans a bit more manageable. But a guy who has no wage, or one that can barely pay the rent, let alone help him pay down some of the debts holding back his non-health care related consumption (the absence of which is what holds back our economy) isn't getting much benefit from the policy.
We're going to see a strange thing in a few years: An economy in which easing has shrunk debts, but not managed to increase available employment in living-wage jobs.* I don't know what that will look like exactly, but it will be odd.
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* To increase wages, you have to fix health care. (We can argue Obamacare does this or doesn't, but one thing is certain: Its effects, good or bad, won't be felt for at least another five years.)
To increase the number of jobs available, you need to create demand. You also need to increase economic activity involving human workers. This is happening in manufacturing and energy right now. But even the rosiest forecasts predict only one or two million new jobs accruing from a resurgence in those industries. And as those green shoots emerge, they are offset by job losses accruing from implementation of human-replacing technologies everywhere else.
You might say easing alone will lead to business investment which leads to more workers. I disagree. I see business owners doing what I am: Shaving costs and pocketing the "efficiency-created margin."
