David Merkel submits: I have a post on the futility of fiscal policy coming, but the hubbub over Jackson Hole has made me alter my publishing schedule. I want to give one more shot on the idea that the Fed is out of ammunition, and that unorthodox moves are more likely to scare the public than result in increased real GDP.
I am better off than all of my friends, I think. A common occurrence for me is a friend coming to me and saying, “How can the government borrow so much? It doesn’t make sense. Why do they spend money on this and not on me?” I understand the paradox of thrift, but I don’t agree with it. One reason is that because it is a paradox, ordinary people will react badly to actions of the government that they can’t do themselves. Second, when the government or central bank does it, it seems like a form of theft, because no one should get something for nothing, and it degrades the ordinary person’s view of the honesty of the Government or Central Bank. Third, what the money gets used for is viewed as a waste by some.
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