Fiscal Policy

Oh, look, what I’ve been saying for decades has a name–“fiscal policy.”

Fiscal policy, which fell out of fashion as an engine of economic growth during the inflationary 1970s, has been front-and-center in the fight against Covid-19. Governments have subsidized wages, mailed checks to households and guaranteed loans for business. They’ve run up record budget deficits on the way — an approach that economists have gradually come to support, ever since the last big crash in 2008 ushered in a decade of tepid growth.

Except, it did not fall out of fashion. It was deep-sixed by the financiers who wanted to restrict the quantity of currency available so they could be lazy and live off high interest rates. 8.1% for thrity year bonds in 1991.

How do we distinguish between fiscal policy and monetary policy? Does the latter focus on quantity, how much there is, while the former focuses on who’s got it? If so, then it is clear why the former makes no sense. It is illogical to focus on the quantity of something whose supply is theoretically infinite.