Josh Barro, Columnist

Inside the Brain of the Hard-Money Advocate

December 17, 2012 at 9:16 PM UTC

Josh Barro is the lead writer for the Ticker, Bloomberg View's blog on economics, finance and politics. His primary areas of interest include tax and fiscal policy, state and local government, and planning and land use. Previously, Barro was a Senior Fellow at the Manhattan Institute for Policy Research and a commercial real estate banker at Wells Fargo. He holds a bachelor's degree in psychology from Harvard and lives in Queens, New York.

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Hard-money advocates warn darkly of the risks of inflation to the dollar. They believe excessive monetary easing could lead to spiraling inflation and severe recession. One problem with this account is that it's wrong, as you can see from the still-rock-bottom inflation estimates that are implied by bond markets, despite the Federal Reserve's unprecedented easing efforts.

But the even bigger problem is that it does not account for the opposite risk: that insufficient monetary easing can spur an economic crisis. To see that risk, you only have to look to southern Europe, which has been forced into monetary austerity by the European Central Bank.