The Ultimate Goal of Monetary Policy
Once in a great while people slip up and tell you EXACTLY what they really think. This happened when Christina Romer, speaking on the "Daily Ticker" said the following at 1min 28 sec into the video: "If you in fact look at what QE does, it tends to lower long term interest rates, it tends to lower the price of the dollar, both of those things are good for ordinary families."
This is absolutely fascinating (at least to me). In the world of Christina Romer, the average family is in enormous debt (which is true), but more importantly her FIX is to put them in deeper debt. Debters do well in an inflationary cycle, as they pay back debt with dollars that are worth less and less. So getting the American people out of debt and in control of their finances is NOT something leading economists are advocating. Of course the fact that gas is $4/gal now must be friggin' AWESOME for the average American family.
But wait (as the Ginsu knife commerical would say), there's MORE. She continues to say "The lower long term interest rates means its easier for firms to do investments, it's easier for consumer to afford borrowing, so that tends to encourage spending, and when people spend that puts people back to work."
I think what bugs me the most is that Christina Romer is not a musician. Musicians often speak about things they don't understand, but Romer is a Professor of Economics at Berkeley. It is true I've often knocked on Keynesian economists, but I didn't think they went so far to believe SPENDING = EMPLOYMENT. If this is the mind of the average economist then we are seriously screwed. In fact, she goes one more step and says "A lower price of the dollar tends to make our goods more competitive in foreign markets so we export more, if we export more we need more workers to produce."
This is STUNNING! And I hope not just to me. A lower dollar is now seen as beneficial, even though NO NATION in history has ever printed its way to prosperity. Later on she says that these policies are: "The ultimate goal for monetary policy."
The interviewer asked about inflation after this initial exchange, here is her response: "What I can tell you is the academic studies that have looked into this absolutely say that QE does what we thought it would going to do. And on the price of the dollar, we're not talking about what is happening to your purchasing power here, we're talking about the price of the dollar in the foriegn exchange market. And I think everyone tends to agree that a lower price of the dollar tends to make us export more and certainly tends to raise GDP, which ultimately is what causes employment."
Holy f'n WOW! Not only does she skirt the issue, but she clearly states that a weak dollar BOOSTS employment. In fact, if we weaken the dollar enough, we can basically work as slave labor to the rest of the world. We'll all be fully employed as our 80 hour weeks of work will get us a place to sleep and enough to eat. Our dollar, worth 1/10,000 of what it is today, will be so export friendly PLUS GDP measured in dollars will grow exponentially. It's a friggin' WIN WIN WIN!
My head hurts too much to write any more, except to say "We're all screwed!"