Useful advice for a certain accountant, no?

The Stiglitzian prescription is to raise the profile of fiscal deficits, that is, to issue more debt and to print more money. You seem to believe that if a distressed government issues more currency, its citizens will suddenly think it more valuable. You seem to believe that when investors are no longer willing to hold a government\’s debt, all that needs to be done is to increase the supply and it will sell like hot cakes. We at the IMF—no, make that we on the Planet Earth—have considerable experience suggesting otherwise. We earthlings have found that when a country in fiscal distress tries to escape by printing more money, inflation rises, often uncontrollably. Uncontrolled inflation strangles growth, hurting the entire populace but, especially the indigent. The laws of economics may be different in your part of the gamma quadrant, but around here we find that when an almost bankrupt government fails to credibly constrain the time profile of its fiscal deficits, things generally get worse instead of better.

5 thoughts on “Useful advice for a certain accountant, no?”

  1. So not only does fiscal policy not work, but monetary policy doesn’t work? I’ll go exhume Milton and give him the bad news.

    Ah, I’ve just gone to read the article and I see Rogoff is discussing emerging markets…i.e. countries not borrowing in their own currency.

    Good editing! But there is a difference between fiscal and monetary policy in the UK (borrowing in £s) and fiscal and monetary policy in Thailand etc. For example, Malaysia, most interventionist in controlling the value of its currency during the Asian crisis, recovered quickest.

    Having said that, the IMF has improved in its advice to financially stressed govt. Although if I were cynical I’d say that was because it was now giving advice in Europe and North America, not Asia and Africa.

  2. It’s also a strange position for you to advocate, Tim, given you are certainly the blogger I read who seems most in favour of debasing the currency.

  3. JustAnotherTaxpayer


    No argument here with IMF as champion of the “Washington Consensus”.

    Poor show though, with the implication that Rogoff’s quote applies to a country like UK, though, which it clearly does not, as LeftOutside says.

    Or even the Eurozone, where monetary policy is still effective.

  4. Pingback: New Year linkathon | Abolish the Bank of England

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