tag:blogger.com,1999:blog-2277215496195926573.post2460271975253826666..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Brad DeLong: the new MMTer?Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2277215496195926573.post-90508073409914099332013-05-02T00:25:33.381-07:002013-05-02T00:25:33.381-07:00I certainly can’t claim you are 100% wrong. Which ...I certainly can’t claim you are 100% wrong. Which raises the question: what does a small country with its own currency do when “paradox of thrift” raises unemployment? MMTers say “just run a deficit and let the debt or monetary base expand”. But against that, the debt or currency of a small country tends to be vulnerable, as you point out.<br /><br />I think my answer is that a small country (which does a normal amount of trade with the rest of the world) works to a significant extent in a US dollar environment. Thus if citizens of the small country save, they’re quite likely to save US dollars, so to that extent there’s no effect on unemployment in the country. (And there is plenty of that type of saving going on right now: Argentina is, and has been an example for some time.)<br /><br />And if a significant amount of saving is done in US dollars, then the relevant small country won’t need to run such a large deficit to deal with paradox of thrift unemployment.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-70939508306557130342013-05-01T17:44:51.862-07:002013-05-01T17:44:51.862-07:00Abba Lerner (1943) thought that you could always r...Abba Lerner (1943) thought that you could always run a large enough budget surplus if necessary to keep inflation low, and the debt would never explode. I don't think that is correct in general--although it may be correct for countries that are at the center of the global monetary system and possess d'Estaing's "exorbitant privilege": it's an empirical question...bradhttps://www.blogger.com/profile/04548019979157668776noreply@blogger.com