Quantitative Easing and Monetary Aggregates http://t.co/GzWDQxLPsx— Paul Krugman (@NYTimeskrugman) 2015, 2月 26
Say to them that the Bank of Japan should announce a minimum inflation target of at least 2 percent, or that there should be a clear commitment to increase the monetary base at an annual rate of at least 15 percent, and you get the feeling that you have proposed an immoral act.
At this point, monetization is Japan's only plausible route back to prosperity. Unless the critics have an alternative to offer, they should stop urging Japan not to take it.
Now, the fact that survey measures are stable, even if they are stable at levels consistent with inflation objectives that the central bank wants to achieve, that's not a guarantee that inflation will over time move to be consistent with those expectations. An example is Japan, I would give you, where for many years the households and businesses expected positive inflation but there was a consistent undershoot. So, this isn't a single metric that is perfect but it's one of many things we would look at.*1
The currently dominant loanable funds (LF) model views banks as accepting deposits of pre-existing real savings from depositors and then lending them out to borrowers. In the real world banks provide financing, by creating deposits of new money through lending. In doing so they are mainly constrained by expectations of profitability and solvency, not by an availability of pre-existing funds.
… he “write fewer articles and have more of a look at the data and then come back again,” he said. “I don’t know why he does that; it’s a mystery and it doesn’t make him come across as a guy who is very well informed.”