I’ve consistently argued that the Fed does what a consensus of economists thinks they should do. There’s no great mystery as to why we don’t have faster growth in aggregate demand, faster growth in NGDP. Most economists think were are doing just fine. Here’s the latest survey:
WASHINGTON (Reuters) – U.S. business economists said the Federal Reserve’s easy money policies have been effective but they do not think the central bank should pump more money into the economy, a survey showed on Monday.
Just over 60 percent of economic professionals polled by the National Association for Business Economics felt the Fed’s two rounds of quantitative easing had been a “success,” the survey said.
However, 81 percent of economists surveyed said the Fed should not pursue another round of quantitative easing or bond-buying this year.
. . .
Although the majority of business economists said that Fed should commit to maintaining low rates for a period of time, only 6 percent said the central bank should keep the key federal fund rates at exceptionally low levels through 2014.
The latest National Association for Business Economics report was conducted between February 15 and March 6 of this year. It surveyed 259 business economists and others who use economics in the workplace.
It could have been worse. At least most economists don’t believe in liquidity traps—that surprises me. In 2007 I would have guessed that 10% believe in liquidity traps. By 2009 I would have guessed 75%. The actual number is apparently below 40%, although it’s hard to be more precise (as QE might fail for many reasons.)
DeLong and Summers are trying to convince their colleagues that we need fiscal stimulus. A more productive use of their time would be to convince their colleagues that we need more stimulus. Once that happens the Fed will snap to it. And then we won’t need fiscal stimulus.