Update to 9/27 post

Ok, so the trillion dollar coin idea...AWESOME! Being a movie buff, I find the movie inspirations particularly great. But seriously, why wouldn't this work? It is a solution that injects mega money into circulation for the purpose of helping the government's debt issues that does not involve printing more paper money, which seems to be a big turnoff for a lot of people. And, as Emily said on her blog, 2 of these trillion dollar coins would also be much easier to guard than a large quantity of coins of smaller denominations, which is another option for accomplishing the same purpose. It sounds like a winner to me.

Give the people what they want: more money

Although I had never heard of a babysitting co-op (I didn't know that people actually started those), I was fascinated by Krugman's comparison of the economy to the one in Washington D.C. And I think he is right; I think the comparison is valid and that we CAN learn much from the co-op's recession, as it were.

In reading how the co-op worked its way out of the slump (by simply putting more coupons in circulation), I was reminded again of this notion that a "money injection" or a little bit of controlled inflation may not be a bad idea for our nation. This is something I've pondered since the idea was first presented in one of our earlier readings. If the people have a tendency to hoard something that is in short supply, then wouldn't increasing the supply of that commodity make the appeal to hoard less? I'm aware that too much money could lead to hyperinflation, but might a little do more good than damage?

Many of the writers we have read point out flaws in economic ideology, but I feel like they fail to answer the question of where those flaws come from in the first place. Sumner says that NGDP is not often considered when gathering and reporting on statistics and he makes a very good case for why it should be. But why is it not already? If people like Sumner have these things figured out, why haven't others caught on?

I think the answer to that is that there could be several ways to "fix" economic "problems" like the Fed's practice of inflation targeting. There is no right answer. There are pros and cons to so many different possible solutions. But I think a good starting place would be to at least include NGDP targeting, even if we don't want to shift to it exclusively. In other words, focus on NGDP in addition to RGDP + inflation rate. Focus on all three elements! Sumner may be on to something in suggesting a closer look at and focus on NGDP increase rate, but the current system focuses more on RGDP + inflation rate. Instead of trying to make the system completely alter its way of thinking, just add a piece to the puzzle. It makes sense to me.

Regardless of its failures to see the 2008 crisis coming, I believe the Fed still has an opportunity to repair our economy. I think they need to read Krugman's article and ponder, as I have been, the potential benefits of injecting society with more dollars. Unlike babysitting, the demand for money is not seasonal; until people are confident that it's safe to let go of their precious savings, they will continue to sit on them season after season and that seems like a big negative to me.

The Shrinking Stomach Effect

I like Krugman's notion that one of the dangers of the recession we are currently in, is that the more manufactures decrease and the longer the unemployed remained that way, the harder it will be for the economy to recover. I see the economy like a stomach; once you have undergone gastric bypass surgery, a procedure that (in its simplest explanation) shrinks your stomach, or once you lose a lot of weight in a short amount of time, it is nearly impossible for your stomach to expand to the size it was before the surgery or weight loss.

Since my oldest brother has his bachelor's degree in construction management, I find Krugman's analysis of the housing market and the role it plays in determining interest rates, inflationary rates, etc. especially interesting. My brother was unable to find a job in the construction field until just this summer ( he graduated from college in 2009) and even now his job is in college facilities, not "traditional" residential or commercial construction. I understand if there is a shortage of funds for construction projects and companies are suffering fiscal losses that we simply can't build new homes or commercial high-rises and the like; however, I think it is safe to say that despite the financial struggle, the demand for homes is rising as the population continues to increase. With construction at a low, demand is going to drive the prices of the limited supply of homes up and that doesn't seem like a win for anyone.

On the Sumner post: I agree that Obama should have taken more economic advice from more people earlier in his term. I do not particularly care for the notion that Obama has created a hostile workplace for women at the White House (I was glad to see that Sumner said he was in no position to make a judgement claim). The new book sounds like a toilet-side reader made for the gossip stands at Bi-Lo checkout lines - one of those infuriating rants that are made popular by media hype. I think promoting garbage like this that might give the average American the wrong impression about a lot of things is a negative role played by our media. I would hate to think that this might be John Doe's only look at Obama's economic discussions and policy progress (or lack thereof). But I have turned this into a "face of American media" rant. I guess that's why I am a communications studies major. :)