It’s a reasonable question, again, assuming my own views will prove, if tested, to be most correct.
The obvious first response is that many economists are idiots. We have, to this day, Nobel Prize winners arguing that we can spend our way into prosperity. How is this possible? Maybe they are bought; more likely is that are smart enough to make the puzzle so complicated that they can get counter-intuitive–and wrong–answers.
Whatever the cause, I do want to point out one thing: it seems to me that inflation and full employment are related, but that the causal arrow needs to be reversed. Specifically, I believe inflation causes full employment. How is inflation created again? Through money creation, which is used to fund industrial expansions.
Now, how the investment banks benefit from fiat money is obvious. They get something for nothing. This tool, though, is also used by people who do actually make things.
Let us take as an example a business startup in China, which we are told is getting ready to go into high inflation. A young man marries the daughter of a prominent local Communist Party official. You have to be connected to them, from what I can tell, to get anything done. You can bribe, you can kiss their ass, but you need their support, since no one has any rights in China not granted them at the whim of the ruling elite.
This young man wants to start up a shoe factor. Our official loves the ideas, makes a few calls, and poof he has a business license (you can’t be on any shit lists and get a license), and $10 million “Mao’s” in startup capital. That money is from the Chinese equivalent of the Federal Reserver. It just “prints” the notes.
Our young man works hard, and the factory succeeds. He employs 100 Chinese, who pay two thirds of their money or so in taxes, and he is now rich. The business is now his, and self sustaining, and he pays the money back.
Yet, this money was created from nothing. Therefore it added to the money supply. Therefore it is inflationary. This is basic. A year or two or five down the road, the effects of this policy hit, and the workers money now purchase less than it used to. So wages rise, and we are told their employment is what caused the inflation.
This gets it backward. Perhaps this correllation is what has confused so many people. Once you learn the lingo, and calculus, and especially once you start reading recondite treatments by economic theorists, common sense flies out the window. That’s how people still believe in Marx, and how Paul Krugman has a job.