MADRID | By Luis Arroyo | Journalist Paul Krugman recently published an illuminating article by Samuelson about the (in)efficiency of the monetary expansion by its own when the liquidity trap has been reached. It is a very clear explanation about the problem of the money: central banks don’t create money if banks don’t want to give credit.
Banks in the US replicate the behaviour of their European colleagues: credit is being stacked in risk-free deposits with the Federal Reserve instead of flowing into the economy.
By Luis Arroyo, in Madrid | Here’s one more example of how politics constantly enters the economics arena with the firm intention of interfering in some way or another. That was the time in which the US Republican conservatives tried to grill the then Federal Reserve chief Paul Volcker when he wanted to cool the high inflation of those days down. Let me quote these few lines: “Secretary Regan mustered…