Unfortunately, the errors of the past, however persistent, don't absolve fiscal and monetary authorities from responsibility for avoiding, or trying to ovoid, serious errors in the opposite direction. Life would be easier if they did. But they don't. 1/n
It's particularly unwise, IMHO, to suggest that ANY positive stimulus, now matter how large, is worth trying because of past inflation undershooting. According to this logic, why not $5 trillion; or $10, or...whatever?
Of course, many politicians will wring their hands at the prospect of piling-on to any such gravy train. They like "doing more" for their constituents. The macro consequences of excessive stimulus aren't their problem. But for that very reason, someone has to look out for those.
So while I'm all for avoiding undershooting; and I understand and support making up for past NGDP level drops, I think economists have a duty to warn against excess stimulus when that seems likely. In that respect at least, I'm with @ojblanchard1 here, in spirit if not specifics.
Maybe he's wrong about how much is too much. But someone has to take the other part in debates in which it's all too tempting to be a "nice" perma-dove rather than a mean advocate of restraint. (Heck, I probably just lost a dozen followers just by saying so.)

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More from @GeorgeSelgin

8 Feb
Thread: Fed officials are now saying that they'll be able to launch FedNow in 2023 rather than later: finextra.com/newsarticle/37…
It's understandable that they should do everything possible to accelerate FedNow's launch: RTP, FedNow's private-sector rival, has been operating since 2017, and its network now covers well over 70% of all U.S. bank deposits, with new depository institutions joining every week.
Universal or "ubiquitous" coverage was one of the key objectives of the Faster Payments Task Force est. by the Fed in 2015. The Clearing House's RTP system answered that Task Force's recommendations. By late 2018 it had 50% network coverage.
Read 19 tweets
27 Jan
It's dandy that 100 DIs have agreed to take part in FedNow's pilot program. That's about as many as are now directly connected to RTP (w/ many others using it through correspondents). And some of the top 15 banks are conspicuously absent from the list. 1/n crowdfundinsider.com/2021/01/171632…
Absent are Bank of America, U.S. Bancorp, Truist, PNC, the TD Bank Group, State Street Corp., and Fifth Third Bank. All save State Street are connected to RTP. So even if FedNow started now and all banks on its list connected, RTP would the bigger network by a long chalk. 2/n
And of course FedNow won't actually be ready to launch for 3 more years: in the world of payments innovations, that's an eon! 3/n
Read 5 tweets
27 Jan
As this claim has met with some resistance, allow me to expand upon it with examples, both fictional.
Suppose, for the first, that I go into my district Federal Reserve bank, find one of its cash tellers (yes, the Fed has tellers), present her with a $20 Fed note, and say, Here is one your liabilities, for $20. I'd like those now."
Of course in reality the teller would call security--itself evidence that the $20 is no ordinary IOU! But suppose instead she doesn't. Instead, she says, "No problem." Then an awkward pause ensues.
Read 7 tweets
27 Jan
An answer, in a thread, because others may gain something by it.
The first thing you must do, if you wish to understand the value of an irredeemable fiat money like today's USD, is to entirely expunge the word "backing" from your economics vocabulary. Trust me, it is good for nothing but mischief.
It's true that the dollars the Fed creates are, for accounting purposes, "liabilities." It's also true that, the market value of the liabilities of most financial firms, such as ordinary banks, depends on the value of the assets backing those liabilities.
Read 18 tweets
20 Jan
Thread: As many may be interested, I'm answering this with a new tweet.
The roots of the "Austrian" claim that fractional reserve banking (FRB) involves fraud or theft trace to the Austrian business cycle theory. According to some versions of that FRB inevitably leads to booms and busts.
In fact that believe is itself wrong, as I first tried to show in The Theory of Free Banking. See also here: alt-m.org/2018/08/16/fra…
Read 14 tweets
20 Jan
I have no idea who James Thomas Kesterton, Jr. is or was, but this is yet another bit of fractional-reserve banking mythology, for which there's not the slightest factual foundation. 1/n
From Collins and Walsh (jstor.org/stable/4407999…): "we can find little evidence of large and destabilizing asset bubbles in the Roman world...credit created by the fractional reserve banks...was not used generally for such speculative purposes." 2/n
As for financial crises, they occurred in 49-47BC and in 33AD. But had political triggers; sources say nothing about banks' involvement, though its probable that many suffered. The '33 crisis was deflationary rather than inflationary. 3/n
Read 4 tweets

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