Sunday, May 31, 2009

Krugman: Inflation Fear-Mongering Is A Right-Wing Plot

" ... the Fed isn't printing money, as we, and others, keep saying. ... "

Joe Weisenthal
Excerpt -
May. 29, 2009

All this talk about inflation, hyper-inflation, an inability to pay off our debts, printing money, the steepening yield curve ... Paul Krugman is having none of it. Not only that, he argues in his latest column, it's all being driven by conservatives eager to torpedo the Presiden't recovery efforts.

On the matter of our exploding debt, he says it's a long-term concern, but that plenty of countries have sustained as-high (and higher) debt-to-GDP ratios.

And he says the Fed isn't printing money, as we, and other, keep saying.

"Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves. And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.

"But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all. ... "

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