Stepping on the Monetary Gas Pedal

We had Brad DeLong and Stephen Cohen in the office on Friday to talk about their excellent new book, The End of Influence. I missed the first half of the event since I was on a radio show, so I’m glad we have the video:

This part of our official CAP writeup hits on the part of their argument that has the most short-term relevance, though it’s not really at the core of what the book is about:

DeLong suggested that the Obama administration can begin to fix this dilemma by appointing “competent economists” to the Federal Reserve Board to reduce and eliminate global imbalances that trap the United States and China in financial terror.

“Ninety-eight percent of economists think a weaker dollar will help the economy,” but it is a difficult sentiment to express without being seen as treasonous, Cohen explained. The value of the dollar must drop in order for us to save more. Our goods will become cheaper, we will export more, and bring down the trade deficit.

And, yes, Europe should be “printing money” too. Somehow the “central bank independence is good because it will stop monetary authorities from sparking inflation to create short-term election-timed reductions in unemployment” principled seems to have morphed into the principle that the idea of central bank independence is that monetary authorities should act with callous disregard for the human consequences of their policies. It’s nuts.