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April Fools' Day Festival, Day II: John Cochrane (Brad DeLong's Grasping Reality...)

In which John Cochrane demonstrates that he understands freshman-level monetary economics less well than a duck understands advanced materials science: John Cochrane (2009): Fiscal Stimulus, Fiscal Inflation, or Fiscal Fallacies?: "First, if money is not going to be printed, it has to come from somewhere... ...If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both. This form of ‘crowding out’ is just accounting, and doesn't rest on any perceptions or behavioral assumptions.
#John-Cochrane #April-Fools-Festival - bradford-delong.com