Thursday, May 3, 2012

Buy enough assets and expectations must change ???

"[I]f the [present and future] price level were truly independent of [today's] money issuance, then the monetary authorities could use the money they create to acquire indefinite quantities of goods and assets. This is manifestly impossible in equilibrium. Therefore money issuance must ultimately raise the price level, even if nominal interest rates are bounded at zero. This is an elementary argument, but, as we will see, it is quite corrosive of claims of monetary impotence…" Gentle Ben