"Since World War II it is only in the early 1980s, in the immediate aftermath of the Volcker disinflation, when the permanence of the reduction in inflation was uncer-tain, was the ten-year Treasury bond rate minus the previous year’s inflation in the range in which expansionary fiscal policy would impose any substantial financial burden on the government—if, that is, the multiplier μ has even a moderate val-ue."
but soon enough the golden punch bowl; is wisked away
"If the U.S. can usually (except in the early 1980s) borrow, spend on government purchases, and end up with no net increase in the burden of financing government debt, why not do so always? "
great question
"The principal reason is that it cannot. "
whoops where's that free punch ?
"A multiplier μ of even 1 is, as we discuss be-low, a somewhat special case, likely to be found when the zero lower bound on short safe nominal interest rates applies."
" A policy-relevant multiplier μ close to 0 is in fact likely to be a better approximation for thinking about discretionary fiscal policy in normal times."
" If so, there is no stabilization-policy case for debt-financed expansionary fiscal policy. "
yup the FED uber alles ...well almost uber alles
