If you realize both parties in Washington think our money is theirs and you trust them to do the wrong thing, this list is for you.
If you think there is a Santa Claus who is going to get elected in Washington and cut a few taxes and spend a few trillion and jump start the economy, and get our lost money back, this list is not for you.
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"When the Treasury pays someone interest, it's not inflationary; it simply leaves less money (out of general tax receipts) available for other spending purposes. On the other hand, when the Fed pays interest on reserves, it necessarily increases the monetary base."
I have a sudden desire to pull out my copy of Mankiw’s Macroeconomics (3rd edition) and quote him from 13 years ago where he said the opposite.
This was sent to me in an e mail have you seen this disgusting garbage we are forced to pay for?
New Animation: ‘Learn To Speak Tea Bag’
http://www.npr.org/templates/story/story.php?storyId=120344047
First of all, keep in mind that Krugman is ALWAYS wrong. The 0 administration is hoping for a gradually declining dollar, not one that drops like a rock. The rest of the world wants that too (mostly for energy reasons) EXCEPT for China. China wants the dollar strong against the Yuan. We are in for a mighty struggle where our side is pulling the tug-o-rope towards a lower dollar. This could end badly.
Uh, he says that the feds borrowing money is not inflationary because the people they borrowed it from have less money to spend, and therefore fed spending is just a sub for spending that the T bill owner would have done.
This presupposes, I think, a closed American system, where the lenders are all Americans and all the spending is for American goods.
If the lenders are foreign, and the money is lent so American consumers and American government can continue to buy foreign goods, then it starts to boil down to what the foreign lenders and foreign manufacturers think about the value of our dollar. If they think our dollar is worth less then they will ask for more interest on the loans and will ask for more dollars for their foreign manufactured goods.
It doesn’t matter what the federal reserve sets the interest rate at if the foreign lenders won’t buy T-bills at that rate.
It seems to me that that is what will be inflationary ...rising interest rates on loans to our government by foreigners and rising prices on foreign goods (like oil) which will necessarily translate into rising costs to our economy.
Great article by Murphy and link to his blog.... bump.