by In this post, Stephanie Kelton takes on Paul Krugman. She appears to agree with Paul Krugman's assumption that monetary policy that is built on raising interest rates to address inflation is not backwards. Actually, central bank interest rate setting is a form of price setting, the policy rate being a variable that sets the cost of borrowing (price of money). Higher interest rates are also inflationary to the degree that increase the income of holders of securities, as Warren Mosler has observed. Instead she addresses the interest rate simply as a policy variable under central bank control, so the central bank can always insure that "r" is less than "g" to prevent interest on government debt from growing faster than the economy. While that is true, wouldn't it be preferable to show
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Mike Norman considers the following as important: Abba Lerner, MMT, MMT criticism, MMT critics, monetarism, paul krugman
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Note that Stephanie Kelton does mentions the expansionary impact of higher interest rates directly to Krugman in Paul Krugman Asked Me About Modern Monetary Theory. Here Are 4 Answers. However, it is mentioned in passing rather than being elaborated, as it really need to be in order to finally bury monetarism in any form, strong or weak.
Stephanie Kelton finally addresses this point in another response to Krugman, The Clock Runs Down on Mainstream Keynesianism.
My suggestion is for the MMT economists to put together an elevator speech on this, along with a more complete explanation that is accessible to non-economists and a tightly argued paper for economist and financial types. It's all there in the MMT literature but it needs to be more tightly co-ordinated.