Saturday, April 21, 2012
Stephanie Kelton — Paul Krugman [and others] wrong about Fed inflation targeing
Stephanie Kelton tweets: "Krugman says the Fed can generate inflation expectations to help the economyhttp://nyti.ms/JaBiWW
#MMT says it can't."
Stephanie cites MMT to the ECB- you can’t inflate, even if you wanted to
Posted by WARREN MOSLER on November 26th, 2011
(h/t Scott Fullwiler via Twitter)
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2 comments:
Unlike what SRW claimed, there is just a world of difference from the mainstream.
The fantasy NCE/NKE story can be said the following way:
The central bank creates inflation expecations. Agents in the economy who have rational expectations and a near perfect foresight (because all of them already know how the economy works!), start consuming because this maximizes their utility. This leads to bla bla bla ... resulting in faster growth.
The central bank can target inflation.
They just have to cheat and start buying stuff.
In other words they have to take over the role that should be the preserve of a democratic government.
The underlying assumption here is that the central bank stick to the rules.
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