A License to Print Money 2

Let me preface this by saying that I'm a fan of Paul Krugman. I've read most of his books, read almost everything at the Paul Krugman archive, and read all of his columns and blog posts since he started working for the NY Times. This blog even has a 'Krugman was right, I was wrong' tag that I use on occasion.

Another strand to this post is that, over time, I've generally come to the conclusion that the simplest way out of the current economic mess for the U.S. would be to print money and distribute an equal share to each citizen until they get a little bit of inflation and a reduced debt load for debtors.

So imagine my disappointment when I read this recent post by Paul Krugman where he said,

"So why not forget about open-market operations, and just drop the stuff from helicopters? Well, remember that at this point cash and short-term bonds are equivalent. So a helicopter drop is just like a temporary lump-sum tax cut. And we would expect people to save much or most of such a tax cut — all of it, if you believe in full Ricardian equivalence."

Both Tyler Cowan and Brad Delong immediately noted that this didn't make any sense, as did a vast number of commenters on the original post.

How disconnected from reality do you have to be to think that if you give money to people who don't currently have any, they wouldn't either spend some of it or pay down their debts with it?

What vision of America must you have to imagine that the only people in America that exist are people who, given a $5,000 cheque from the government, would save all of it and not spend a dime.

It's especially frustrating because it seems as though there is almost a conspiracy of silence around pretending that America's economic woes couldn't be solved by printing a little money. And when one of the few prominent people you can expect to be both knowledgable and a straight-shooter takes on the issue, he uncharacteristically dodges the question with half-truths and deception.

The jedi mind powers of the creditor class are powerful indeed.

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Updated to add, if you are interested in more elaboration on my opinion that printing money is the solution to the U.S.' economic problems, this post does a good job summarizing my views on the topic.

Actually, No

This is just a follow-up to my post below, where I was noting how we like to make up stories about the economy to pretend we understand what is happening. Just after I posted that, I read this in the Globe, "In actual terms, it was the worst performance for auto makers since January, 1991, amid the recession caused by the first Gulf War."

The author Greg Keenan, just mentions in passing, as if it was commonly accepted, that the early 90's recession was caused by the Gulf War, as if if only there had been no Gulf War there would have been no recession.

Meanwhile Wikipedia suggests it was initially caused by the Savings and Loans crisis, and also posits that the recession lasted longer in Canada because of the threat of Quebec separatism.

Meanwhile, here you can see the start of an academic paper that presents a "reasonably comprehensive list of possible causes drawn from all schools of thought".

There are 8 in total, none of which refers to the Gulf War as a (direct) cause.

Or here is a paper from the Federal Reserve Bank in the U.S. which is honest enough to conclude by suggesting a point of inquiry for someone else to go figure out what happened because they're not entirely sure. Although it does helpfully note that the economy had been weakening well before the Gulf War started.