Posted by WARREN MOSLER on August 13th, 2012
> (email exchange)
> On Sat, Aug 11, 2012 at 1:32 PM, Paul wrote:
> In an op-ed ”Thirty Years Later, a Return to Stagflation” (Op-Ed, Feb. 14), Representative
> Paul D. Ryan, Republican of Wisconsin, argued that the stimulus plan will bring the
> combination of high inflation and high unemployment known as stagflation.
> Here is a copy of my February 22, 2009 published letter to the Editor of the New York
> Times evaluating Paul Ryan’s economics.
February 22, 2009 (NYT)
To the Editor:
Paul D. Ryan repeats the tired idea that when the Federal Reserve prints money for the government to spend on economic recovery, the result will be inflation because ”it is a situation in which too few goods are being chased by too much money.” This is based on a false assumption that the output of the country will not increase when government lets contracts to businesses to produce more goods and services that will improve the productivity and health of our country.
If there is significant unemployment and idle capacity in the private sector (and who can deny that there is?), then this deficit spending will not cause inflation. Rather, the ”printed” money spent on a recovery plan creates profit opportunities that induce private enterprise to hire and produce more goods. Then there will be many more goods available for this money to chase and no inflation need occur.
Boynton Beach, Fla., Feb. 14, 2009
The writer is editor of The Journal of Post Keynesian Economics.