In a recent article written for the New York Times, Harvard economist Gregory Mankiw envisaged that the time of reckoning arrives in 2026.

Text by Greg Mankiw, Comments in bold by Warren Mosler.

The following is a presidential address to the nation — to be delivered in March 2026.

My fellow Americans, I come to you today with a heavy heart. We have a crisis on our hands. It is one of our own making. And it is one that leaves us with no good choices.

For many years, our nation’s government has lived beyond its means.

A rookie, first year student mistake.  Our real means are everything we can produce at full employment domestically plus whatever the rest of the world wants to net send us. The currency is the means for achieving this.  Dollars are purely nominal, and not the real resources.
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Writer and journalist Darrell Delamaide acknowledges that the public discussion is driven by obsolete theories – increasingly rejected by a growing number of economists and investment managers – that deal with the world as if it were under a gold standard.  Please click here to read his commentary.

(By Andrea Terzi)
This WSJ article compares the action of the lead economist of Eve Online to control a virtual economy’s inflation with the Fed’s activity in controlling the money supply. I’m quite surprised that no one noticed that what Mr. Gudmundsson does when he assigns (or drains) free amounts of virtual money to (from) players is fiscal action, not monetary policy. Following the description of what he does, it seems clear that he is not conducting open market operations (swapping securities for reserves). Rather, he spends (first!) and tax (later!) virtual money, like the Treasury actually does.
A most interesting implication of Mr. Gudmundsson’s experience in this Online Game is that his success in controlling inflation is based on fiscal, not monetary operations. Far from associating the task of this virtual game’s economist to a real world central banker’s, the author of the article should have noticed that price stability is here (and perhaps also in the real world?) secured by fiscal actions.

In 1996 (the year of his Nobel Prize—and of his death), William Vickrey wrote the Fifteen Fallacies of Financial Fundamentalism, where he questioned the notions that budget deficits impoverish future generations, savings stimulate investment, government borrowing competes with private investment, policy should target the NAIRU, and structural policies are the best means to reduce unemployment.