Increasing public debt is bad for a number of reasons. Journalist Matthew Yglesias, speaking on vox.com, gives voice to a very different, very Pollyannish perspective: “Debt is just not a problem right now,” he says.
Why?
“The U.S. can never run out of dollars.” After all, the Fed can just print more.
That’s not an uncommon view where I live, near the center of privilege, Washington, D.C.
The video starts with an instruction: “Stop freaking out about the debt.” It sports nifty, simple graphics and comforting music. Matt Yglesias sounds convinced himself.
Nothing he says convinces me. But I’ll concentrate just on the frank inflationism.
Yglesias mentions inflation. But it’s obvious he means CPI numbers, even though he offers the short-hand “too much money chasing a fixed amount of stuff” definition to stand in for the “supply of money increasing faster than the demand for money” definition that I hear from competent economists.
But while he admits that price inflation can be a problem, what he is promoting is inflationism. That’s the doctrine that central bank fiddling with increases in the rate of money growth is the way to control the economy. And that it’s costless.
Like money cranks of the old days, he only sees the costs of not inflating the credit system.
It never enters into his ideologically-driven thoughts that maybe artificially lowering interest rates fakes out investors and consumers, getting them to make bad investments that destabilize relative prices that, when they unravel, wreak havoc.
Inflationists are folks who are always trapped by the cure they prescribe. We’re left with boom-bust forever and ever.
This is Common Sense. I’m Paul Jacob.