FREE Exchange mused on the points made by Dylan Grice (quoted in this blog yesterday) about the stealth nature of money printing, that this is the government funding itself in a less than transparent fashion. The post didn't really tackle that point head on, arguing in essence that
I see arguments like this all the time, and I'm not sure whether they're a result of overthinking monetary policy or underthinking it. Something about money makes people a little crazy.
Let me start by agreeing that to describe QE as "almost treasonous" is indeed crazy, Very smart people think it is our best option for reviving the economy so we all need to frame the debate in less vituperative terms.
But at root, the battle is between money's two main functions in history; as a means of exchange and a store of value (economists dream up a lot of other functions for money but these are the essential ones). History is a battle between these two camps; the debtors and the creditors. Free Exchange (as befits the column's title) is a means of exchange guy; like William Jennings Bryan and John Law before him, if you can multiply the means of exchange, you will increase the amount of trade. These views go in and out of fashion. When the sound money camp dominates (as it did in the 1930s), there can be a crisis as borrowers are unable to meet their debts; when the easy money camp dominates, as in the 1970s, you get inflation and the need to restore faith in money's value, a feat achieved by Paul Volcker.
Read Full Article »