E Responsibly Expand The Monetary Base Before It Is Too Late

According to Batman:

"Better three hours too soon than a minute too late."

Unfortunately, the Federal Reserve Bank has never taken that advice. One hopes that someone will get serious about the expansion of the monetary base since GDP is slowing in the face of inflation that is not raging. You want fiscal responsibility? Then understand and promote the concept of helicopter money as it was meant to be.

It may prove to be more responsible than Paul Krugman's slight of hand Keynesianism, and more responsible than John Cochrane's fiscal instability views, both discussed below. They both seem to push for diminished fiscal credibility as policy because they know you can't default on your own currency. Compared to those guys, Lonergan's helicopter money plan looks responsible and sensible.

This article is a summary look into ideas regarding the expansion of the monetary base (base money) founded upon the study of leading economists. The reader can decide if the expansion of the monetary base is a good thing and the best way of going about it. This overview could make it easier for the reader to get a concise take on the issue. It is all about how this expansion would be accomplished safely, without bringing economic instability, that is at stake.

Remember, even though you could have inflation running at 2 percent, as the Fed targets, you could also have a dropping GDP, meaning inflation should have run a little higher during that time to make up for the loss of GDP. This is a Sumner,market monetarist concept. (As an aside, the Fed may be constrained to not let inflation out of the bag as I have written in many articles. The Fed knows banks have bet on low bond rates in the age of derivatives and that those bonds are in massive demand, so the Fed may feel a need to protect them.)

 

Paul Krugman by Shankbone

So, David Beckworth wrote an article way back in 2014 that attempts to explain the process of expanding the monetary base. The goal of monetary base expansion is something that is promoted by three economists, Cochrane, Krugman and Sumner. Before I get to that article I want to review what Eric Lonergan said.

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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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