Just after the election of 2008, the Nobel laureate liberal economist Paul Krugman made a prophecy: we will not restore prosperity, he warned in The New York Review of Books, “unless we are willing to think clearly about our problems and to follow those thoughts wherever they lead.” But as Krugman’s thoughts drifted back to the maxims of John Maynard Keynes—maxims he called “more relevant than ever”—our thoughts could be turning to the older and in some respects wiser innovations of President Lincoln and the Republican Congress during the Civil War. Here’s the gist of it: using the monetary methods of Lincoln, updated to employ the inflation-fighting tools of the Federal Reserve, we could pay for a faster recovery and a great many worthy projects without higher taxes, without more national debt, and believe it or not, without inflation. How? By letting Congress exercise a little-known power that is used (very quietly indeed) by the Federal Reserve: the power to create new money.
more from Richard Striner at The American Scholar here.