Despite Evidence, Keynesians Want More Fiat Money
May 3, 2012 by Sam Rolley
Printing too much fiat money is dangerous and has historically led to rampant inflation, but central banks throughout the world are currently printing full speed ahead. According to analysis, theyâ€™re failing miserably.
Washingtonâ€™s BlogÂ reports that Keynesian economic thought has led mainstream economists to ignore debt and advocate even more money printing all over the world.
It seems outrageous that governments could possibly spend their way out of financial crises, but that is precisely what economists like The New York Timesâ€™ Paul Krugman believe. Â He recently opined that the Federal government let the financial crises go to waste by not using even more inflationary tactics than it has in battling economic decline in the United States.
After the debt crisis hit in 2008, Federal Reserve Chairman Ben Bernanke nearly tripled the size of the Fedâ€™s balance sheet from about 6 percent of gross domestic product to almost 17 percent of GDP. It is now about 20 percent of GDP.
But Krugman believes Fed printing should make up an even larger slice of GDP, writing in a recent column:
Consider, if you will, the current state of our nation. Despite hints of economic progress, weâ€™re still in the midst of an immense disaster, in which unemployment and underemployment are devastating millions of American lives. And none of this need be happening! There has been no plague of locusts; we have not lost our technological know-how. Americans should be richer, not poorer, than they were five years ago. Yet economic policy across the board has become almost passive, has essentially accepted this disaster instead of trying to end it.
Those who subscribe to the Austrian school of economic thought fiercely disagree with ideas like Krugmanâ€™s, just as Republican Presidential candidate Ron Paul did when the two debated this week on Bloomberg.