Fiscal Theory

Dean Baker — prominent Keynesian pundit and codirector of the Center for Economic and Policy Research — testified that the dollar's fall was inevitable, and even a good thing in light of the US trade deficit. At the time, I knew I disagreed with Baker, but I didn't get a chance to explain why.

A recorded mini lecture and video display purported to explain this mysterious phenomenon (mysterious to the Old Lady of Threadneedle Street, anyway). I knew that I was going to hear either a self-critical explanation or, more likely, some hogwash. Hogwash won, hands down, writes Patrick Barron...

Inflation or deflation? Dow 1,000 or wheelbarrow money?

If Bernanke has to choose between saving rich bankers or the dollar, I am confident he will choose the former. We have good reason to expect rising prices and no dramatic efforts to reverse course.