Saturday, August 21, 2010

North Korea Aiding U.S. Economy?

According to this story, the U.S. State department accuses the government of North Korea of counterfeiting $100 bills on a large scale. The State department further argues that this constitutes an act of aggression and is part of an effort to "sabotage" the U.S. economy.

But if we are to believe Paul Krugman and other Keynesians who claim that the U.S. economy faces a destructive deflationary spiral, North Korea is (if these accusations are true) actually aiding the U.S. economy. After all, if the problem is too much deflation, then more money will help alleviate the problem as an increased quantity of money will mean less deflation. Whether it is the U.S. or North Korean government (or other governments or private counterfeiters) which increases the quantity of money is irrelevant. Regardless of the source, more money will tend to raise prices or reduce price cuts.

So, if we are to believe the Keynesian analysis that most (if not all) of Obama's economic advisors believe in, we should be lauding North Korea for its efforts to fight the threat of deflation!