Friday, December 2, 2011

Mankiw: Print Money, Here, There, Everywhere

Harvard professor and the world's greatest economic textbook salesman,Greg Mankiw, has a solution for all the economic ills in Europe, the United States, and although he doesn't mention it I'm sure he thinks it could also work in Zimbabwe: PRINT MONEY.
If I understand the news coming out of Europe correctly, the new head of the European Central Bank is offering a simple deal: If fiscal policy becomes hawkish, monetary policy will be dovish. In other words, as government spending is cut to put European governments on a sounder financial footing, monetary policy will do its best to ensure that any adverse impact on aggregate demand is kept to a minimum.

That seems a sensible compromise, given all the competing risks. Indeed a similar deal might well make sense for the United States...My more conservative friends argue, based on monetarist principles, that a dovish monetary policy risks future inflation. In my view, however, there are bigger risks than inflation just now. They include prolonged high unemployment and meager growth.
I note Mankiw writes this as the economy is in a major manipulated turnaround mode, because Federal Reserve Chairman Bernanke is already printing like a mad man.  Mankiw fails to understand the turn, because his entire view of the economy is based on the flawed Keynesian "animal spirits" view of the economy. He won't see the change from his demand, demand, demand view until after the change has occurred. He doesn't get the causes of the change in the economy.

In the fifth edition of his textbook, Principles of Macroeconomics, (it sells marked down at Amazon for $156.49!), he references John Maynard Keynes on page after page, yet does not mention the economic theorists who developed the only business cycle theory where central bank money printing is considered at its entry point and explains what it does to the structure of the economy, Ludwig von Mises and Friedrich Hayek.

Bottom line: Although Mankiw and Paul Krugman are fierce rivals, in reality they are just two fish in the same Keynesian inflationist bowl, with only different stripes. They both love money printing and have no fear of inflation, despite the fact that inflation does nothing but distort the economy in favor of those who get the money first, at the expense of the rest of us. Krugman and Mankiw are thus nothing but apologists for the state and its evil printing ways.


  1. Maybe the Havard University students that walked out of Mankiw's Econ 101 course recently were on to something. Their heads are in the wrong place, but their gut instinct is right, just like the OWS crowd.

  2. I like the distilled thought that the beneficiaries of the inflated money supply in the Keynes model are the ones who get it first, but who are they?

    The managed economy idea seems so wrong, what good does it do to devalue the savings of the elderly and reduce the wealth of the poor.

  3. So many good ways to spend $156.49, "Principles of Economics" is most certainly not one of them. Perhaps in another 98 years, after the dollar loses another 98% of its value?