Chillin' out till it needs to be funded
Call it history repeats itself, call it precociousness of an economic genersation witha distributed intelligence, I think from my experience since the 90s the following two events noted by Paul Krugman, would be what would determine America’s future in the next decade...and he wrote them together, almost.. ( Surely, I appreciate that, Mr Krugman)
David Wessel has an article asking what Milton Friedman would say about quantitative easing, and concludes that he would have been in favor. But I was struck by Friedman’s 1998 remarks about Japan, in which he basically said that increasing the monetary base would do the trick:
“The Bank of Japan can buy government bonds on the open market…” he wrote in 1998. “Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand…loans and open-market purchases. But whether they do so or not, the money supply will increase…. Higher money supply growth would have the same effect as always. After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately.”
Well, they did that: staring in 2000, the BOJ nearly doubled monetary base over a period of 3 years.
And the money just sat there. Banks did not, in fact, expand loans.
In fact, Japan’s experience is a key element of the case against monetarism. Just printing notes does not work when you’re in a liquidity trap.
When I read the Mitch McConnell quote that’s been getting so much attention:
The single most important thing we want to achieve is for President Obama to be a one-term president.
my immediate concern was whether it was taken out of context. And if you read the full National Journal interview (subscription required), the nuances are a bit different from those you might take from the quote in isolation.
But not in a good way.
If you read the whole thing, what you get is that McConnell is taking a very different lesson from the events of 1995 than the one most pundits take, and expect Republicans to take. The whole attempt to bully Clinton into slashing Medicare by shutting down the federal government was a political failure for the GOP; but McConnell doesn’t see this as evidence that Republicans were too confrontational.
No, he sees it as evidence that they weren’t confrontational enough; they were too focused on their policy agenda, and neglected the necessary work of destroying Clinton:
We suffered from some degree of hubris and acted as if the president was irrelevant and we would roll over him. By the summer of 1995, he was already on the way to being reelected, and we were hanging on for our lives.
So this time around they won’t bother much with trying to get actual legislation passed; they’ll focus on the important thing: undermining the man in the White House.