The Fed Should Back a Bigger Deficit
Posted at 10:15 a.m. on Feb. 13
Martin Wolf calls on central banks to use their nearly limitless ability “to supply reserves at will” to finance an expanded government budget deficit.
“Measures of broad money have stagnated since the crisis began, despite ultra-low interest rates and rapid growth in the balance sheets of central banks… The US has suffered from famine, not surfeit… Why is it good to support the leveraging of private property, but not the supply of public infrastructure?”
“The quantity of extra central bank money required would surely be smaller than under today’s scattergun quantitative easing. Why not employ monetary financing to recapitalise commercial banks, build infrastructure or cut taxes? The case for letting fiscal deficits facilitate private deleveraging, without undue expansion in overt public debt, is surely also strong.”