tag:blogger.com,1999:blog-8764541874043694159.post5044063138041190573..comments2024-03-28T12:23:39.665+00:00Comments on Coppola Comment: Goodbye QE, hello rate rises? Not so fast.....Frances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-8764541874043694159.post-84073660645181229602014-11-01T13:51:12.074+00:002014-11-01T13:51:12.074+00:00Frances,
I agree that we’re in “a new, strange wo...Frances,<br /><br />I agree that we’re in “a new, strange world” where we “wandering without a map” (a point you made in the final paragraph of your Pieria article). A fundamental question that needs answering in this new world is whether government borrowing actually makes any sense. That is, why not continue with QE and QE the entire debt?<br /><br />Milton Friedman advocated a “zero government borrowing” regime. See paragraph starting “Under the proposal…” here:<br /><br />http://0055d26.netsolhost.com/friedman/pdfs/aea/AEA-AER.06.01.1948.pdf<br /><br />Warren Mosler advocated the same. See his 2nd last paragraph here:<br /><br />http://www.huffingtonpost.com/warren-mosler/proposals-for-the-banking_b_432105.html<br /><br />As to any inflationary effect that might come from QEing the entire debt, that is easily dealt with by raising taxes and “unprinting” the money collected. Assuming the inflationary effect of the former equals the deflationary effect of the latter, then there’s be no effect on GDP. Of course that’s easier said than done, but IN PRINCIPLE disposing of the entire debt over a few years would not be difficult.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-80220474863550690662014-10-31T21:29:34.653+00:002014-10-31T21:29:34.653+00:00In a fiat currency system the fiscal agent is alwa...In a fiat currency system the fiscal agent is always guarantor of the central bank. But you are missing the point. Interest rate rises threaten fiscal solvency because they increase the debt servicing costs for government. <br /><br />I'm not going to discuss central bank solvency on this post, sorry. It is off topic. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-19669450024166626772014-10-31T20:42:49.258+00:002014-10-31T20:42:49.258+00:00Only if the fiscal agent is a guarantor of the cen...Only if the fiscal agent is a guarantor of the central bank. Mathematically, do you disagree that with high enough rates, central bank equity turns negative?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-82466632036630860422014-10-31T20:39:02.344+00:002014-10-31T20:39:02.344+00:00No. They threaten fiscal solvency, not central ban...No. They threaten fiscal solvency, not central bank solvency. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-65518642440092688232014-10-31T19:51:21.631+00:002014-10-31T19:51:21.631+00:00Rate rises out the yield curve threaten central ba...Rate rises out the yield curve threaten central bank balance sheet solvency, right? Anonymousnoreply@blogger.com