Posted by Michael A. Kamperman on November 26, 2012
In his New York Times column Fighting Fiscal Phantoms Paul Krugman has finally stated the obvious, that since the U.S. federal government owes almost everyone dollars which it can print, then it can never go bankrupt. He further states that printing money in and of itself will not lead to inflation in a depressed economy. Hopefully people in Washington are listening. While not implicitly stated, Professor Krugman has adopted the central tenet of Modern Monetary Theory.
My book How America Can Escape the New Great Depression is based on the position Krugman staked out today. From this position the book details a whole host of potential policy prescriptions to end the economic downturn and return millions of people to meaningful work. It has been very difficult to drive any policy discussion, no less response, in this direction. Despite the book, numerous blog posts, and contacting opinion leaders, the position Professor Krugman staked out today has been rare to appear as part of the national conversation. Hopefully today marks a turning point.
All of the calls to raise taxes, cut entitlements, and cut spending in general are all based on a view point the debt is too high and letting it get any higher places the nation at risk. Nothing could be further from the truth. Past cultures would practice human sacrifice to prevent a volcanic eruption or to make sure the Sun would rise the next day. We have been sacrificing our economy over fears we cannot pay what we can print. Freedom from this archaic thinking will open the door to new ideas of how to best deploy our resources to confront our challenges. Obviously there has been no good reason to have cut a single teacher from a single classroom due to money because our federal government has an unlimited amount of money to spend. We could aggressively increase our funding for cancer research and for alternative forms of energy. The only thing that has limited our solving our problems are closed minds. Today Paul Krugman opened some minds. Lets hope it gains momentum.