Saturday, July 20, 2013

Berkeley bookkeeping?

Professor J. Bradford DeLong, on his blog, quotes Joe Gagnon
 Monetary policy consists of printing money to buy assets....Fiscal policy consists of selling assets to buy goods, cut taxes, or increase transfers…. 
Selling assets = incurring liabilities? Because that is what deficit spending is; borrowing money to spend on whatever government chooses to do.  Of course, government could increase taxes, rather than 'cut taxes', which would be fiscal policy too, but would have nothing to do with 'selling assets'.

In fact, when one actually does sell an asset, one gains another asset in return; money. When one borrows money one incurs a liability.  One would have thought a Harvard Phd would have known that.

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