Martin Wolf Favors Printing Money
if governments need to run deficits, to support demand at a time of private sector weakness, they can always borrow from central banks. Yes, this is “printing money”. It is also an insanely radical policy recommended by no less insane a radical than Milton Friedman, back in 1948. His view was that the government could expand the money supply during recessions and contract it in the subsequent booms. A country with a fiat currency and a floating currency could, thus, stabilise the economy without destabilising credit markets. The neat thing about this proposal is that one does not have to decide whether fiscal policy or monetary policy is doing the heavy lifting: they are two sides of one coin.
It’s very encouraging to see this viewpoint presented in the Financial Times! . Note the link Wolf uses in the above quote. It’s to a paper by economist L. Randall Wray. Wray has been one of the few voices supporting the Functional Finance view of Abba Lerner that was discussed at length in yesterday’s post. A very positive development if Lerner (and Wray) begin to enter our discourse. Progessives must become aware of the Functional Finance view. Where are you Paul Krugman?