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Friday, December 02, 2011

Mankiw: Print Money, Here, There, Everywhere

Harvard professor and the world's greatest economic textbook salesman,Greg Mankiw, has a solution for all the economic ills in Europe, the United States, and although he doesn't mention it I'm sure he thinks it could also work in Zimbabwe: PRINT MONEY.

If I understand the news coming out of Europe correctly, the new head of the European Central Bank is offering a simple deal: If fiscal policy becomes hawkish, monetary policy will be dovish. In other words, as government spending is cut to put European governments on a sounder financial footing, monetary policy will do its best to ensure that any adverse impact on aggregate demand is kept to a minimum.

That seems a sensible compromise, given all the competing risks. Indeed a similar deal might well make sense for the United States...My more conservative friends argue, based on monetarist principles, that a dovish monetary policy risks future inflation. In my view, however, there are bigger risks than inflation just now. They include prolonged high unemployment and meager growth.


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