Tuesday, October 4, 2011

Brad DeLong has a Plan to Reflate the US Economy

From a post on UC Berkely professor economics Brad DeLong's blog Grasping Reality with Both Hands:
Helicopter Drops: Does the Treasury Have Authority to Lend $10,000 Interest-Free to Every 2011 Taxpayer?

by J. Bradford DeLong

Mint ten $1,000 platinum coins for each 2011 taxpayer. Lend them to each 2011 taxpayer--at zero percent nominal interest for a hundred year term, so that each taxpayer or their heirs and assigns will be liable for paying the money back in 2111.

Does the Treasury have authority to do this right now? I think it might--or that the same lawyers who say that what we did in Libya was not "hostilities" would be able to claim that the Treasury has such authority.

And if the Treasury doesn't, I am pretty confident that the Federal Reserve does. (Every taxpayer might have to first fill out a form incorporating him or herself as a bank holding company, however.)
I agree that the above would work. I agree that is is fully as legal an action as the Bush legal team's assertion that "enhanced interrogation" techniques like waterboarding were legal because they are not torture. I wish Ben Bernanke would act immediately on this. This is even better than John Maynard Keynes' prescription to cure the Great Depression:
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
If only Bernanke of Obama had the guts to make a dramatic move like this to rescue the world from 10 years of a Japan-style "lost decade"...

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