Thursday, October 21, 2010

Let's inflate! No, really!

From Jacob Viner in 1933, via Milton Friedman via Brad DeLong (no, I'm not joking):

"it is often said that the federal government and the Federal Reserve system have practiced inflation during this depression and that no beneficial effects resulted from it. What in fact happened was that they made mild motions in the direction of inflation, which did not succeed in achieving it....
[If] a deliberate policy of inflation should be adopted, the simplest and least objectionable procedure would be for the federal government to increase its expenditures or to decrease its taxes, and to finance the resultant excess of expenditures over tax revenues either by the issue of legal tender greenbacks or by borrowing from the banks..."

No Plan B?