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Wednesday, November 12, 2008

I really like this guy...but here he gets it wrong.




Robert Samuelson is now sounding the alarm regarding deflation. That is total and utter economic rot. Deflation is the easiest thing in the world to fix. Don't believe it? Then tell me the Fed could buy up all the assets in the world and not cause inflation and then you'd be right. Of course, it is utter nonsense. I have a lot of respect for the writings of Robert Samuelson. Here he is dead wrong. And so are people who speak of "the liquidity trap." It shows a confusion between nominal and real quantities. But they neither know it nor admit it.

And if you think Ben Bernanke is going to preside over deflation, you are http://www.youtube.com/watch?v=qFx7xNPP8bQ

http://www.realclearpolitics.com/articles/2008/11/the_specter_of_deflation.html

3 comments:

Anonymous said...

How is deflation so easy to fix?

Randall Parker said...

By increasing the supply of money. It is that simple. We know from the quantity theory of money that MV=PQ. You step on M long enough and P will rise. History is absolutely crystal clear on this matter. If this were not so we could buy up the whole world, which we may do anyway with bailouts.

ineffectivemonetarypolicy said...

liquidity trap explained