Wednesday, June 2, 2010

Piketty: Monetize the Debt

Thomas Piketty calls upon the ECB to monetize the European debt, that is, to exchange cash sonnant et trébuchant for sovereign debt in order to increase the money supply. He also holds up the US as an example to Europe: the US, he says, has not prematurely moved to austerity, which is "always disastrous" for countries attempting to move out of recession. In short, Piketty agrees with Paul Krugman about what ought to be done, but he seems unaware of Krugman's fear that the US isn't doing it: that even the American stimulus is too small and that the "deficit hawks" are winning the public debate and even beginning to win the debate inside the Federal Reserve (three of whose governors voted at its last meeting in favor of increasing the federal funds rate). Economists, apparently, find coordination as difficult as governments.

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