In response to How to Debate Paul Krugman: "Ask Questions Like a Child", a self-proclaimed "Libertarian Turned Keynesian", a graduate of Columbia University, writes ...
Hello Mish I want you to publish this rebuttal to your post. You can use my first name if you'd like with Libertarian-turned-Keynsian in brackets. Let's say there are 8 million healthy, unemployed people in US. The Treasury can simply print 4 million pieces of IOU claiming that the holder of this piece of paper is entitled to a free massage or a free cleaning services or free haircut or free baby-sitting or free moving (basically any service worth $50 with negligible raw material) from another unemployed person and simply distribute it to unemployed people. What happens? On Day 1, the 4 million who got the coupons tender their coupons and receive services (increase in daily GDP 4 million * 50 == 200 Million). On Day 2, the opposite happens and this goes on quite a while. Now, lets say the economy improves and 2 Million get employed. Now essentially we have 1 Million extra coupons (inflation). Treasury will tax the lucky/rich people who have a job and a coupon and essentially retire them. Or, let's say the economy deteriorates and 2 more more million get unemployed. Now there are few coupons and some may be willing to do the job for 3/4th of a coupon (deflation). Now essentially Treasury can print extra 1 million and distribute them. Notes: 1) We need flexible money supply. 2) Having gold standard is stupid. What does amount of gold supply have to do with anything? 3) We increased GDP by simply printing pieces of paper. Bonus: Let's say someone comes with a brilliant idea that one unemployed can actually perform two jobs a day. Now instantly the capacity doubled and Treasury can print double the amount of IOUs.
