Every so often, the Minneapolis Fed’s Narayana Kocherlakota likes to remind Congress that to the extent America has a problem with subpar economic growth, that problem can be solved with more debt. Of course all problems can be solved with more debt. That, as we put it a few months back, is an immutable truth, as critical to the pseudoscience of economics as Newton’s first law is to physics and we know it to be true because it’s propagated by one of the greatest economic minds in the history of the world: Paul Krugman.
But if the only place this finds expression is on Krugman’s New York Times blog then it won’t be much use when it comes to saving the world. Fortunately, there are central planners like Kocherlakota who are willing to turn Krugman-isms into policy.
Back in July, in remarks ironically prepared for delivery at a conference hosted by the Bundesbank, Kocherlakota noted that in order to lift the neutral rate, US lawmakers might want to consider issuing more debt. Translated from ‘economist’ to layman, that just means this: ‘we may need to ease again and we’re bumping up against the lower bound on the rate cut side and we’ve run out of monetizable assets on the QE side.’
Kocherlakota was quick to note that he wasn’t attempting to tell Congress what to do, he was only dropping subtle hints about what might happen to still-depressed aggregate demand if the Fed doesn’t have enough rope to do more of the things which have so far failed miserably when it comes to boosting said demand:
This post was published at Zero Hedge on 09/09/2015.
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