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“ He’s still convinced that money creation does not cause increased prices”
Why does the government need to tax at all, then? They can just give us free money, which is equivalent to giving us free stuff, amirite?
Dittoes if deficits aren’t a problem at all – hold him to his exact words on both of these things (btw, he was simply wrong when he said that the government owed most of the money to itself – noting that even, technically, the bonds held by the Federal Reserve are not held by the USG, because the Federal Reserve is technically a private organization; it’s a Quango, as the Brits would say). But be that as it may, if deficits aren’t a problem at all (his words), why tax at all? Just to sock it to hated richers, it seems, because stuff that comes from the government is basically magic – it’s free from all constraints.
“that contains a graph showing the growth of the monetary base since 2008 and a relatively flat CPI as evidence that money creation does not cause an increase in CPI.
My assumption is that CPI has not gone up because the banks are sitting on the new money rather than lending it into circulation, but even then, are we to expect prices to go up with exact proportion to the money creation?”
Professor Herbner will certainly be much better positioned to answer this than I am; but basically the banks aren’t lending the money because 1) the Fed is, effectively, paying them a small sum to not hold them and thus sum outweighs any benefit the banks can see from lending it because 2) the obvious bad result, since this method of “fixing” the economy (massive bogus stimulus programs and QE) has nothing whatsoever to do with producing a real economy where it seems that there are investments (loans) worth making.
Also, one reason the CPI hasn’t spiked much is that the velocity of money is still well below previous levels – again because this method of “fixing” the economy has left it enervated.
So your friend’s answer to this is, evidently, “more of the same,” because doing the same thing over and over again, just BIGGER, is obviously going to have a different outcome!