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Fiscal policy creates debt that needs to be repaid. Ordinary monetary policy involves swapping new currency for very stable assets like Treasury bonds that can
by Eliezer 6y ago
Fiscal policy creates debt that needs to be repaid. Ordinary monetary policy involves swapping new currency for very stable assets like Treasury bonds that can be sold back later to destroy the currency. As much aggregate demand as possible should therefore be created by ordinary monetary policy, since it's cheaper (and faster and easier).
- WanderPanda 6y agoBut monetary policy is quite unfair in that it benefits the wealthy / institutionals most (e.g. through buying of junk bonds) while inflating the money of all other people
- RobertoG 6y agoThat's not how it works(1). As the QE programs have showed, you don't get any demand by creating more reserves in a depression. For those reserves to get traction over the economy you need somebody that borrow from the banks. (1) - http://bilbo.economicoutlook.net/blog/?p=661 http://bilbo.economicoutlook.net/blog/?p=661 http://bilbo.economicoutlook.net/blog/?p=29140 http://bilbo.economicoutlook.net/blog/?p=29140