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View Diary: The Debt Ceiling Is Not Unconstitutional, Right Now! (56 comments)

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  •  Inflation? Nonsense. (2+ / 0-)
    Recommended by:
    maddogg, ItsaMathJoke

    Any argument that requires the unstated assumption of "the economy automatically tends toward full employment" is unfounded.

    And that is the foundation of the "seigniorage automatically creates inflation" argument, the idea that the economy either is at or automatically tends to full employment.

    If we were at full employment ~ say the dollar dropped substantially and we had an even bigger export boom than we presently have, big enough to spark an investment multiplier-accelerator ~ we would have a much smaller deficit, so balancing the budget would be easier, and at the same time, "balancing the budget" would no longer have the same risks of a second massive financial crisis like 2008 ...

    ... so in the only circumstances where there might be an inflationary risk, there's no longer any serious economic damage caused by balancing the budget.

    Cutting a budget-surplus program like Social Security and a balanced-budget program like Medicare because we have given rich people tax breaks but continue to spend ever more on military spending in the interests of rich people would be insane in any event. But at full employment, the deficit would be small enough that just taking back a portion of the Bush giveaway to the wealthy would be sufficient to eliminate the deficit.

    For much more on modern monetary theory, see billyblog

    Support Lesbian Creative Works with Yuri anime and manga from ALC Publishing

    by BruceMcF on Thu Jun 30, 2011 at 09:56:43 AM PDT

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