Summary of An Old Tool to Fight a New Recession

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Traditional monetary policy prescribes injecting money into a system in crisis. But with interest rates near zero, US policy makers will need a new trick to stimulate the economy the next time it buckles. In this intriguing Bloomberg column, history professor Stephen Mihm argues that central bankers should bone up on a idea proposed more than 100 years ago: that what an ailing economy needs isn’t more money but faster money. Executives, entrepreneurs and citizens interested in a creative response to the next recession will find this a thought-provoking article.

About the Author

Stephen Mihm is an associate professor of history at the University of Georgia.

 

Summary

With interest rates near zero, the US Federal Reserve may need new tools to deal with the next recession. Conventional monetary policy probably won’t work in the event of another economic downturn. 

One alternative may emerge from the past. In the 1880s, a German businessman named Silvio Gesell moved to Argentina, where he personally witnessed the country’s “deflationary crisis.” He saw that, when the value of money goes down in a crisis, people tend to hold on to it in the hope that its value will go up again. Gesell went on to read the classics in economics and...


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