Date: Wed, 29 Aug 2001 23:08:54 -0500 From: "Forstater, Mathew" <ForstaterM at umkc.edu>
Doug wrote:
>And it would be kind of hard to measure the presence of even several=20
>bladdersful of Sawicky pee in Lake Erie. Which is another way of=20
>saying that while the government can create money out of thin air,=20
>its prospects for doing so are quite limited if you want the money to=20
>retain any value.
I think "quite limited" is exaggerated. No one has to adhere to any 'far out' theories to recognize that *under certain conditions* a federal government has the ability to spend enough to affect employment, output, income, social services, etc in a significant way, without setting off serious inflation. "significant" meaning enough to make it worthwhile in terms of affecting enough lives (through job creation, income maintenace, etc.). "under certain conditions" being those conditions under which it is most desirable for government to do so--when there is significant unemployment. we can then take it a step further and say that government could spend even more if moderate, *expected* changes in the price level were not thought to be a problem (or were considered worth the trade-off). so I think we have gone off track here. when can argue that it is wrong to say that there are *no* limits to national debt or debt-gdp ratios, or argue against the 'taxes-drives-money' view, or against the view that taxes and bond sales cant finance government spending, but to argue that government can't spend without it being inflationary is not an argument against 'neo-chartalism', it is 'pre-Keynesian'. Mat