Thinking Big About Covid-19 and Monetizing Public Debt
India can show the way to be smart, not coy, on rolling back decades of inflation-era dogma.
If the world has to change, what about public debt?
Photographer: Ashish Vaishnav/SOPA/Getty Images
A Holy Grail of policymaking since the end of the 1970s high-inflation era has been to stop turning public debt into interest-free money. In emerging economies like India, where the idea made a late entry, this dogma is threatening to get in the way of mounting a robust response to the coronavirus.
The reluctance to surrender hard-won victories is understandable. Swapping the debt associated with grand anti-poverty programs with cheap-to-print currency used to have an irresistible sway. The belief that only an Odysseus-like central banker can avoid being seduced by the politicians’ siren song and steer the nation to price stability wasn’t an easy sell.