Capital in the Twenty-First Century

by Thomas Piketty

What happens next depends on how this monetary policy influences the real economy. If the loan initiated by the central bank enables the recipient to escape from a bad pass and avoid a final collapse (which might decrease the national wealth), then, when the situation has been stabilized and the loan repaid, it makes sense to think that the loan from the Fed increased the national wealth (or at any rate prevented national wealth from decreasing). On the other hand, if the loan from the Fed merely postpones the recipient’s inevitable collapse and even prevents the emergence of a viable competitor (which can happen), one can argue that the Fed’s policy ultimately decreased the nation’s wealth. Both outcomes are possible, and every monetary policy raises both possibilities to one degree or another.