I hate to say I told you so . . .
Since this past October I have been so alarmed about the worldwide collapse in demand that I have become something of a pest, badgering everyone who would listen about the urgent need for monetary stimulus. At first the economics community seemed totally focused on the various bank bailout proposals. The prevailing view was that the financial system was the fundamental problem and falling demand was a symptom. I never understood this argument, as modern macro theory says falling AD is a symptom of monetary policy that isn’t expansive enough. Now perhaps things are getting bad enough that people are beginning to understand that it does no good to bail water out of a boat if it is coming in even faster through a hole in the hull.
From a piece in Tuesday’s FT by Martin Wolf: