A very shortsighted statement from Krugman — especially with CB balance sheets over $10tn. History has largely been a series of government driven inflations.
In fact, the only periods of restraint have ever been when the government was handcuffed through using a sound money
In fact, the only periods of restraint have ever been when the government was handcuffed through using a sound money
Out of fear we’re persuaded into believing a govt monopoly on money is necessary to preserve financial markets.
Since the last ties to the gold standard were broken in 1971, governments have expanded precipitously by way of deficit spending, into almost all facets of life.
Since the last ties to the gold standard were broken in 1971, governments have expanded precipitously by way of deficit spending, into almost all facets of life.
Pre 1971, the only govt deficits were in war years which quickly reverted after. However since 1969 we’ve run a deficit in every single year but 4
We have the highest peacetime deficit in history, largely b/c of CB's that are monetizing our debt and removing all constraints
We have the highest peacetime deficit in history, largely b/c of CB's that are monetizing our debt and removing all constraints
Central banks have allowed effectively unlimited credit creation and growth. Global debt is at record levels despite slowing growth in income and productivity.
Debt isn’t inherently good or bad. The problem is when that profit motive / restraint is removed
If debt / cost of capital is > than income, the only way to pay it back is through more debt, or debt monetization -- hence the CB's. This ultimately creates massive fragilities
If debt / cost of capital is > than income, the only way to pay it back is through more debt, or debt monetization -- hence the CB's. This ultimately creates massive fragilities
This is exactly what we’ve seen. CBs have removed the checks on debt and we’ve seen both debt levels and frequency of crises grow as a result
Between 1860s and WWI there weren’t any shocks that impacted 50% of countries. Since 1913 they’ve become a regular occurrence.
Between 1860s and WWI there weren’t any shocks that impacted 50% of countries. Since 1913 they’ve become a regular occurrence.
And the main policy response of the Fed after each and every recent crisis has been to lower rates further and print more money.
Debts are so large that the only way to prevent the system from exploding is by generating even more debt
Debts are so large that the only way to prevent the system from exploding is by generating even more debt
Central banks were created ultimately to *remove all restraint*. CBs cause the crisis then pretend they're necessary to mop it up.
And as a result, credit expansions have been getting larger, govt's have become more imposing and there's more tail risk than ever.
And as a result, credit expansions have been getting larger, govt's have become more imposing and there's more tail risk than ever.
