Marcus Nunes has a new post today that provides fodder for making a case against the modern presentation of ABCT out of practicalities. In it, he quotes Mr. Ritenour, a professor of economics attempting to refute Market Monetarism, thus (emphasis is mine):
NGDP targeting advocates end up fostering the monetary illusion that scarcity can be overcome and prosperity can be achieved via monetary inflation. In fact, issuing fiduciary money via credit expansion promotes unsustainable boom activity because it provides both the incentive and the means for entrepreneurs to undertake projects for which there are insufficient real resources to complete. The necessary consequence of monetary inflation—even if the desire is to stabilize actual or expected NGDP growth—is the boom/bust cycle, in which resources are squandered, capital is consumed, and society is relatively impoverished. Such an outcome is the exact opposite of the desires of those advocating NGDP targeting.
Mr. Ritenour apparently believes that we all live and die by interest rates; and economics isn’t about money, but resources. It’s interesting how he paints MMers with a very broad brush that we are all from a different planet and can’t understand the simplicity of the argument he makes.
The problem is that we understand it too well; and a plain English translation is:
No one has a crystal ball; and we can’t think out of the box. Therefore, the money supply must be limited to keep enough people poor so that resources aren’t squandered. Preserve resources through purposeful poverty (as long as he doesn’t become one of the unfortunate ones). Why not? We can’t miss what we’ll never have.
I’m not sure how we can make the leap in logic from limiting the money supply to avoiding squandering resources – instead of having necessity be the mother of invention. Substitutes and ingenuity, I suppose aren’t in his vocabulary. I am very sorry to remind him that it wasn’t average people playing with MBS and credit swaps. In fact most people invest in funds and fund managers invest on their behalf. Limiting the money supply won’t change what gets done with the money there is; all it would do is limit who has money to do things with.
It’s a great theory if one is interested in creating an aristocracy; and I think it would be much better for hypocrites like Mr. Ritenour who partake of the economic prosperity from fiat money while it’s there to be had to set the example. Instead of advocating policies that would necessarily assign and trap others into subsistence farming, he should take some of the burden of the current tight money problem off the rest of us by giving up his job and stop wasting precious resources on himself. Oh, but I suppose he just doesn’t have the right hair for farming.