Another Keynesian Idea: G3 Needs To Print More Money To Avoid Trade War

Is is just me or does modern Keynesian theory sound more like bizarro economics with everything turned upside down: money printing good, savings bad, deficits good, fiscal prudence bad, more debt good, and inflation an absolute necessity. To me Keynesian philosophy is almost completely backwards and there is no doubt that it has led the US and other western economies to the brink of economic ruin. But the Keynesians are still not done, they say if we could just have another stimulus package and more QE then the economy would return to normal growth. In an article published today "one of the world's most respected economists," Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley says that in order to avoid a global trade war G3 countries (US, Europe, and Japan) should all print more money. Here is the excerpt from his article:

There is a better way for the G3

If targeted asset purchases succeed in boosting domestic demand, then the G3 economies can, in fact, all export more to one another. Thus, the three central banks need to specify exactly what they will buy and explain through what channels those purchases will stimulate domestic demand. (I have my own ideas about exactly what they should do, but that’s properly the subject for another column.) Those who fear that the Fed, BOJ and ECB have beggar-thy-neighbour intentions will be reassured. This is not a time for constructive ambiguity.

It really does take a Ph.D to come up with this level of sheer nonsense. If I understand the author, the G3 should all print money to reassure the market (and other countries) that they are not engaging in beggar-thy-neighbor policies. This sounds like some Orwellian police state doublespeak. Printing money is currency debasement and represents a beggar-thy-neighbor policy! It may take a while for it to show up in the CPI, but don't let the Keynesians tell you otherwise. Another problem I have with this proposal is the incorrect premise by the author that money printing boosts domestic demand. If that is true, then why is the Fed contemplating QE 2? Didn't QE 1 boost domestic demand? In reality QE 1 did nothing to help the real economy, except artificially boost asset prices. But then again, sound reasoning and empirical evidence mean nothing to a Keynesian economist armed with an faulty computer model.

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Another Keynesian Idea: G3 Needs To Print More Money To Avoid Trade War