Calling Out Paul Krugman

Paul Krugman has been busy as a bee of late tearing into QE truthers and inflation hawks for their gross ignorance. How could they have been so stupid to believe that QE would cause inflation? he asks. Let me show you my IS-LM model, which clearly shows that QE cannot trigger inflation during a liquidity trap.

Before delving into the flaws of his argument, let’s be clear: he is right in some respects.


Money Unbound

Last night I realised that focussing this blog solely on secular stagnation was a mistake. Reading through a discussion by pre-eminent economists on whether secular stagnation is the cause of the slow recovery, or of Greek’s problems, it suddenly hit me: it doesn’t really matter.

That’s right: it doesn’t matter what causes deficient demand. What matters is that demand can be deficient.

The problem is that the secular stagnation debate introduces a false premise: that without secular stagnation our monetary system is civilised.

Can we end the business cycle for good?

My publisher has posted an article explaining the key differences between negative interest rate systems like the one proposed by Gesell and neutral money. Click here to read.

If you’re left wanting more, please see “How do the required changes differ from similar sounding ideas?” in the FAQs.