Evidence that central bankers cannot be trusted
There’s a great new Wall Street Journal article that begins as follows:
In the seven years since the world’s central banks responded to the financial crisis by slashing interest rates, more than a dozen banks in the advanced world have tried to raise them again. All have been forced to retreat.
But it’s never their fault:
Riksbank Deputy Governor Per Jansson, in a 2014 speech, responded to critics saying, “with hindsight, it is clear that monetary policy could have been somewhat more expansionary if we had known that inflation would be as low as it is now.” But, he said, “This is a natural and unavoidable consequence of the fact that monetary policy has to be based on forecasts, which are uncertain.”
Former ECB President Jean-Claude Trichet, who pushed eurozone rates up in 2011, said he needed to react to rising inflation driven by commodity prices and a threat that households and businesses might expect higher inflation rates in the future. The ECB’s mandate was for inflation near 2%, and the ECB delivered “exactly what we promised” during his term, he said in an interview. Subsequent rate reductions happened after he left and the inflation backdrop shifted, he said. Mr. Trichet said he used other measures to combat financial turmoil, including bond purchases and emergency loans to banks.
Per Jansson doesn’t tell the WSJ readers that the Riksbank’s own internal inflation forecast predicted failure, as inflation was expected to remain below target even without a rate increase. Lars Svensson was so exasperated he resigned in protest. The Riksbank was clearly violating its legal mandate to target inflation.
Regarding Trichet, I don’t know whether to laugh or cry. Imagine someone named Trichet racing to the edge of the Grand Canyon at 100 mph. Besides him sits Mr. Draghi. Just before he reaches the edge of the canyon, Trichet rips off the steering wheel and hands it to Draghi. Here, you drive. And then he jumps out the window.
Heh, we hit the inflation target under my watch, it was my replacement who fell short. Don’t blame me.
For years, the Paul Krugmans of the world have been telling us the Eurozone Depression is so deep that monetary policy isn’t enough, we also need fiscal stimulus. At the same time the Trichets of the world are raising rates to prevent eurozone overheating. You can’t make this stuff up, it’s just too bizarre.
Who am I to question the wisdom of the central bankers of the world? They are often much more distinguished than I am. In fact, I don’t trust my own judgment; I presume that Yellen and Fischer are much better monetary economists than I am. But it seems the markets also think the Fed is wrong:
Fed officials now say they plan to move gradually. But their expectations for rates could still be too high. Officials in June estimated the Fed would raise the short-term federal-funds rate from near zero now to 1.625% by the end of 2016 and to 2.875% by the end of 2017.
Investors have a different view. Fed-funds futures markets, where traders place bets on the outlook for the central bank’s benchmark interest rate, put the Fed target at under 1% at the end of 2016 and under 1.5% at the end of 2017. In anticipation of the Fed’s next policy meeting, some officials have said they expect to reduce their projections for rates in the future. Their projections for where rates will end up in the long run have drifted down by a half percentage point in the past three years.
Yup, they’ve “drifted down” and they’ll keep drifting down, as long as central bankers think they are smarter than the markets.
As you read the following, think about how the real risk free interest rate is determined in global markets. Then ask yourself how much success the Fed is likely to have against this backdrop:
Mario Draghi’s promise that the European Central Bank is willing to step up its stimulus if needed is resonating with economists, who see the euro-area recovery as too shallow to be sustained.
More than two-thirds of respondents in a Bloomberg survey predict the ECB’s president will expand or extend the 1.14 trillion-euro ($1.3 trillion) quantitative-easing program, and almost all of those say he’ll do so within nine months. While an increasing number of respondents see the economy improving for now, they’re also fretting that the upturn won’t last long.
The ECB’s Governing Council has already shown concern that a slowdown in global trade will erode exports, a pillar of the regional recovery, before domestic demand is strong enough to compensate. The central bank this month cut its growth and inflation forecasts and Draghi told reporters that QE is flexible in size, duration and composition. In contrast, the Federal Reserve may raise its interest rates as soon as this week.
“QE risks becoming a semi-permanent feature,” said Gianluca Sanna, a portfolio manager at Banca Monte dei Paschi di Siena SpA in Milan. “While it’s certainly true that the euro zone is indeed going through a phase of decent, maybe even above-potential, output growth, chances are that there is nothing self-sustaining in what we are seeing right now and the euro zone ends up again in a low-growth environment with inflation dangerously close to zero.”
I very much hope I’m wrong, just as I hope I’m wrong in my prediction that Chinese growth will come in well below the consensus.
HT: Foosion
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14. September 2015 at 19:27
Thanks for highlighting the obvious (but, as usual, not to all) fact that the “2% target” is a lie, and it’s rather unfortunate that the people propagating that lie are the ones most worried about “credibility”.
The Riksbank example is the most stark since we have a vocal insider not afraid to put his job on the line to tell the truth (there should be more people like him in public office, not fewer!)
14. September 2015 at 19:58
If CB inflation targets are so robust that CBs can effectively monetize large portions of national debt, why wouldn’t we want QE to be permanent?
Still believe the very worst feature of monetary policy debate — worse than the liquidity trap, even worse than confusing nominal rates with the stance of monetary policy — is the unsupportable notion that “normal” interest rates is a meaningful concept that should drive CB policy.
Watch the reserves in China. They should just let the currency float and take their lumps, spending $100B a month in FX to intervene isn’t a sustainable policy. How quickly they bow to reality will tell us a lot about the country’s medium-term prospects as well as the stubbornness of the regime.
15. September 2015 at 03:12
Apparently Europeans have a penchant for bad monetary policy ideas:
http://www.bloomberg.com/news/articles/2015-09-15/fed-increase-for-wimps-economists-propose-1-8-point-rate-rise
Proposing a 1/8 point rate increase. I mean, it’s like they haven’t even considered that it’s not the level of the 0.25pc rate increase that most are objecting to but the trajectory.
15. September 2015 at 03:17
Then there is Ray Dalio:
http://www.reuters.com/article/2015/08/25/us-markets-global-bridgewater-idUSKCN0QU1UQ20150825
“Next big Fed move will be to ease, not tighten”
“Our risk is that they could be so committed to their highly advertised tightening path that it will be difficult for them to change to a significantly easier path if that should be required,” Dalio said.
15. September 2015 at 03:27
“But it’s never their fault:”
But the Great depression and the Great recession was never your fault Sumner, according to you. The credit expansion and money supply inflation during the 1920s and the 2000s that you say were good, is not at fault.
You also deny being (in this case intellectuslly) at fault.
“Yup, they’ve “drifted down” and they’ll keep drifting down, as long as central bankers think they are smarter than the markets.”
But you also believe you’re smarter than markets. To you markets are too stupid to set the right NGDP, given they are also too stupid to set the right wage rates which are “too sticky”, but central banks can save people from themselves by doing what you want, by printing unlimited amounts of money so that NGDP never goes down.
All this so that no matter what is produced, no matter how discoordinated people’s activity becomes due to your preferred savior central bank inflation, the population of people will always be rescued with guaranteed NGDP.
People according to you are so stupid that without a smart central bank, they will allow Hitlers to rise all over the world. After all, the reason Hitler rose in Germany was because…wait for it…of a lack of pieces of paper.
15. September 2015 at 03:40
major freedom-
market controls RGDP. NGDP is a monetary thing. If you want to get rid of interventionist fed, you have to get rid of USD as well. It’s very existence is an intervention: how many dollars should there be?
15. September 2015 at 04:14
“Who am I to question the wisdom of the central bankers of the world? They are often much more distinguished than I am.”
Yeah, but Krugman is rather distinguished and he agrees with you. I’ll go with you and Krugman over the CBs.
“Their projections for where rates will end up in the long run have drifted down by a half percentage point in the past three years.”
Wonkblog has a good article summarizing Fed’s downward drift since 2008 “The economy never seems to be as good as the Fed thinks it will be”. http://www.washingtonpost.com/news/wonkblog/wp/2015/09/15/the-economy-never-seems-to-be-as-good-as-the-fed-thinks/
I wonder what Summers would do if he had been appointed. His current writings are good, but compare academic Bernanke to Fed chair Bernanke.
15. September 2015 at 04:33
Thanks, lots of good comments.
15. September 2015 at 05:21
Re: Trichet. Certainly part of the problem is that the ECB only has an inflation target? Trichet’s job was 2% inflation, in his eyes (those of a non-economist) that was achieved. Therefore he did his job.
15. September 2015 at 05:36
IQ is wonderful, but often not strong enough to overcome the effects of an organisation.
The Joint Chiefs of Staff once advised President Kennedy to launch an unprovoked first nuke-strike against the Soviet Union, before the Soviets could build the type of weaponery that would allow them to retaliate (well, much, our losses would been millions of people anyway).
People with very high IQs supported the American South in its gambit to create a slave nation by launching an incredibly deathly war against the United States.
I am not comparing our central bankers to that type of lunacy. But obviously well meaning people with very high IQs can get off track.
And what would be wrong with QE as conventional policy?
15. September 2015 at 05:57
Great post, Scott. Preach.
15. September 2015 at 06:13
Lars Svensson has nice slides about inflation targeting and the expectations of firms and households.
http://larseosvensson.se/files/papers/discussion-of-inflation-does-not-anchor-inflation-expectations-brookings.pdf
It is difficult to believe that the government of Sweden is keeping him on the sidelines and that no other central bank made him an offer.
15. September 2015 at 06:54
@Sumner: “In fact, I don’t trust my own judgment; I presume that Yellen and Fischer are much better monetary economists than I am” – quit being so arrogant, it’s clear you mean the opposite. But here’s how to square the circle: central banks follow markets. If the market does not want higher rates, central banks must retreat when they try and raise rates. Repeat after me: central banks follow the market, they don’t make the market. And when they try and make the market they fail if the market does not follow them. Simple.
15. September 2015 at 07:07
To me, “as long as central bankers think they are smarter than the markets” is absolutely key.
The market expectations piece of MM strikes up these unresolved, stubborn debates about efficient markets and rational expectation. But this is quite irrelevant given that the Fed currently uses expectations – their own. Unless it can be shown that the Fed has better insight into the market, it makes no sense to criticize the use of market expectations to guide policy while defending current approaches that rely on Fed expectations *of the market*. Bizarre.
Reminds me of the story about a bear, a friend, me and who can run faster.
15. September 2015 at 08:25
O/T: Scott, in your opinion, what’s most wrong with macro (as a field of study) these days?
15. September 2015 at 12:41
What do I know but from here the ECB’s behavior looks inexplicable.
15. September 2015 at 13:27
“Regarding Trichet, I don’t know whether to laugh or cry. Imagine someone named Trichet racing to the edge of the Grand Canyon at 100 mph. Besides him sits Mr. Draghi. Just before he reaches the edge of the canyon, Trichet rips off the steering wheel and hands it to Draghi. Here, you drive. And then he jumps out the window.”
-Do you have any theoretical or practical justification for that mind-bogglingly terrible analogy? Don’t you say you don’t believe in long and variable lags? And how could the wheel be ripped off when the ECB can still operate at the ZLB?
15. September 2015 at 15:14
“the Paul Krugmans of the world have been telling us the Eurozone Depression is so deep that monetary policy isn’t enough, we also need fiscal stimulus. At the same time the Trichets of the world are raising rates to prevent eurozone overheating. You can’t make this stuff up, it’s just too bizarre.”
obviously Krugman wouldn’t agree with you that the eurozone calamity was caused by the ECB briefly raising the base rate a little bit.
15. September 2015 at 15:15
and of course other parts of the world in which central banks didn’t briefly raise the base rate a little bit also had bad recessions followed by extremely weak below-trend growth.
15. September 2015 at 15:33
Goldman Sachs’ chief economist’s model says Fed should be easing, not tightening. http://www.bloomberg.com/news/videos/2015-09-15/goldman-chief-economist-fed-should-ease-not-tighten Rationale is that the market has in effect already tightened.
He also says the major risk today is Asia.
15. September 2015 at 15:48
Alfred, Do you think he’s really that stupid, or is this just CYA? (My view)
Ben, Yes, history is full of examples where the elite opinion was wrong.
Ray, In this case I meant what I said. Fischer is considered one of the top three monetary economists in the world. And guess what? I’m not.
You said:
“Repeat after me: central banks follow the market”
Just add the word “should” and you are a market monetarist. On the other hand, maybe it would be better if you stayed out.
Dustin, Good analysis.
Tom, Everyone doesn’t agree with me! Seriously, the problem is that macroeconomists don’t spend most of their time studying monetary history, and the history of monetary thought. They have too narrow a focus.
E. Harding. Inflation has been far lower under Draghi than Trichet. Please tell me why. Is Draghi more of a hawk? Or did Trichet hand him the steering wheel as the car was going over the edge?
Philippe. The US had a recession in 2012? Who knew?
You said:
“obviously Krugman wouldn’t agree with you that the eurozone calamity was caused by the ECB briefly raising the base rate a little bit.”
I don’t think interest rates are a good indicator of easy or tight money, so the real problem was not that the ECB raised rates, but rather that the ECB adopted a tight money policy.
As far as Krugman, he’s a brilliant monetary economist and hence understands the concept of knife edge equilibria. He’s warned that a 1/4% rate increase risks pushing the US back into recession, hasn’t he?
Yes, a 1/4% increase by itself doesn’t mean much, it’s the tight money policy that accompanies that increase that does the harm.
15. September 2015 at 16:36
Ben:
“The market controls RGDP. NGDP is a monetary thing. If you want to get rid of interventionist fed, you have to get rid of USD as well. It’s very existence is an intervention: how many dollars should there be?”
All aggregate money-based statistics are “monetary things.”
Nobody is forcing you to accept the Fed in such a way that you end up believing that there is a practical difference between advocating for a specific Fed activity, and apathetically or reluctantly advocating for that specific activity on account of falsely believing you have to choose some Fed activity.
Apathetically or reluctantly advocating for NGDPLT on the basis that the Fed has to target “something” by virtue of it existing, does not absolve you from being someone who advocates for positive destruction in the economy with supposed cure of more inflation during certain periods of time that is itself the cause of the problems.
Failing to recognize the detrimental effects of one’s apathetic advocacies, and then refusing to accept this after being shown how they lead to detrimental effects, and then, to add insult to injury, accuse others of refusing to accept the detrimental effects of their advocacies, is what I am pointing out in Summer’s writings.
You don’t have to advocate for any Fed rule. You are not forced to do so. I don’t advocate for any Fed rule. I am no worse off for not advocating for NGDPLT.
If you feel for some strange reason obligated to advocate for a particular Fed rule on the basis that you believe the Fed is not going away any time soon, is to me like advocating for a particular rule of rape, murder, and theft, on the basis of the belief that rape, murder, and theft are not going away any time soon.
If you believe a particular detrimental activity is likely going to take place tomorrow, that is no reason to advocate for it while pretending not to be via apathy. You make your own bed.
My main argument is that Sumner is accusing others of what he himself is doing.
Now to answer your question, of what dollars are to be replaced with, that is not for me to answer. I am not a dictator. It is not up to me. To ask that I give you an answer, as if it is to be binding on you and everyone else, is to ask me to betray my own principles.
The answer is that the market process should be the method by which this question is answered.
Just like you accept is best for cars, houses, food, water, medicine, clothing, you know, the life saving pretty important stuff.
If we lived in a fully communist world, and I said the market should be the method to produce and distribute food and medicine, rather than the state, would it make any sense to demand that I give you and answer right there and then about what food and medicine should be produced if the state ceases to monopolize it?
15. September 2015 at 17:06
“Is Draghi more of a hawk?”
-Relative to the ECB’s 2% target, yes. Again, as I’ve pointed out previously, the movements of European and American CPIs were indistinguishable until October 2013.
15. September 2015 at 17:47
“the ECB adopted a tight money policy”
well their policy is a 2% inflation target. Other central banks which also have a 2% inflation target did not do what the ECB did, and instead engaged in unprecedented levels of base money creation, but they failed to hit their nominal targets.
15. September 2015 at 18:47
Major Fiefdom,
“would it make any sense to demand that I give you and answer right there and then about what food and medicine should be produced”
It’s pretty obvious that our social system should at the very least result in the production of the food and medicines which we need to sustain our lives. That’s an objective criterion by which you can judge a particular social system – does it produce the food and medicines which people need in order to survive?
What you’re trying to do is propose a social system which can’t be judged by any criteria other than its adherence to the arbitrary property rules which you have invented.
So instead of asking questions such as “does our social system produce the food and medicines that we need in order to live?”, you want the question to be instead “does our social system adhere to the property rules which Major Fiefdom has decided are best?” You really couldn’t care less whether people die of starvation or preventable diseases. Those things are not relevant criteria, according to you.
15. September 2015 at 18:51
Sumner: “[Ray Lopez[ “Repeat after me: central banks follow the market”
Just add the word “should” and you are a market monetarist.”
OMG quit these word games. So you are saying the Fed should follow the market yet target NGDP? How do you square that circle? Are you saying targeting NGDP is radically different that targeting interest rates and/or raising reserve ratios, the latter two being things the Fed does/used to do? Or something else?
C’mon professor. It’s true many of us here post for entertainment, as this site is just for fun, but we also are here to learn something. Have pity on us please. Obscure writing is indeed a good defensive mechanism but once in a while you have to stick your neck out and take a clear stance. Don’t worry, few of your professional critics are wasting their time lurking here.
A post to clarify the above would be welcome. And I’ll think of a rebuttal, you can be sure of that.
16. September 2015 at 00:56
“as long as central bankers think they are smarter than the markets”
In other words, as long as central bankers exist.
16. September 2015 at 02:44
E. Harding, You’ve lost track of reality if you think Draghi is more of a hawk. He inherited a eurozone plunging into recession, in case you missed that.
And inflation is not the ECB’s only mandate, that’s a myth.
Also, Trichet allowed deflation in 2009, is that his mandate?
Philippe, Yes, and the Fed came closer than the ECB. Are you seriously arguing the Fed didn’t do better than the ECB after 2011?
I can’t believe all these people defending the ECB. Is there no screwup so bad you would not defend them?
16. September 2015 at 17:35
Philippe:
It’s pretty obvious that our social system should at the very least result in the production of the food and medicines which we need to sustain our lives. That’s an objective criterion by which you can judge a particular social system – does it produce the food and medicines which people need in order to survive?
What you’re trying to do is propose a social system which can’t be judged by any criteria other than its adherence to the arbitrary property rules which you have invented.
So instead of asking questions such as “does our social system produce the food and medicines that we need in order to live?”, you want the question to be instead “does our social system adhere to the property rules which Philippe has decided are best?” You really couldn’t care less whether people die of starvation or preventable diseases. Those things are not relevant criteria, according to you.
16. September 2015 at 17:48
If you couldn’t tell what I did there Philippe, I merely showed you that your entire argument against mine, demolishes your own argument. In other words your argument is self-defeating.
For here you are telling me that you will not accept anarcho-capitalist ethics no matter what, come hell or high water. That you put at the top statist property ethics, and everything else can become no more important than secondary to that.
That even if states murder millions of people (which occurred during the 20th century, and of course is continuing to this day), even if states prevent the production of life saving medicine that would save millions of lives, even if states drop bombs on innocent civilians, none of that matters to you, because your sole concern is that statist property ethics MUST exist at minimum, and you are OK with millions of people getting killed be wise of it.
What you are totally clueless about, still after all this time, is that to save lives and promote human welfare, we need to produce the most real wealth that we can. To produce more and better medicine, more and better food, more and better shelter, more and better clothing, more and better everything.
What you are also totally clueless about is that coercive wealth transfers, which is all that states can ever do, produces exactly zilch, zippo, nadaz not a single atom of wealth. Taking by force produces jack all.
In other words, what you are totally clueless about is that in order to produce the most wealth, the question is not “How can we get the state to steal and redistribute existing wealth”, but “By what codes of conduct can humans produce the most real wealth?”
The answer to that question is laissez-faire, not the wealth destroying, waste creating, coercive system of theft that you’re peddling.
You aren’t concerned with promoting human welfare, because if you were then you would allow people to promote their own lives as they, not you, see fit. But you don’t. You want to put your religion of statist property ethics at the top. The state can take with force, and those not in the state must accept it. Those are your property ethics. That is what you want to sacrifice human welfare to. You want humans, innocent humans who have done you no wrong, to be the fertilizer of the parasitism that you falsely believe is productive activity.
Philippe, you are so wrong and you are so oblivious. Totally and completely wrong about humanity. You are a sick person.
17. September 2015 at 02:52
I can’t be bothered to respond to such a profoundly illogical comment. You’re a totally delusional idiot.
17. September 2015 at 10:56
Phillippe, I don’t see how targeting NGDP is going to result in a society that produces more food and medicine; whereas we do have concrete evidence that the free market does produce these things.
You and the major both want the same outcomes, but he supports a system which produces such positive outcomes.
17. September 2015 at 17:21
Philippe:
You lose.
17. September 2015 at 18:12
Charlie Jamieson:
I hear that phrase a lot. Those who have otherwise opposite views on how to achieve an outcome, can both agree on wanting an outcome.
I get the motivation behind that belief. It is based on a desire to find common ground. And what an obvious common ground it would be if we focused on an outcome of better standards of living, healthier people, less disease, and longer lives?
I used to think that was a valid common ground, but after doing some more reading, studying, and thinking, I have since rejected that particular common ground approach, because the path, the means, the method, these are themselves inseparable from outcomes. Indeed all means in a social context are also outcomes themselves. There is a constant stream of outcomes for each individual.
For example, suppose Philippe wants the outcome “Happier people”. Since he is still too intellectually and emotionally immature to know any better, suppose he believes that armed thugs taking from some people and giving to others can achieve that goal.
Now totally apart from THAT goal, there are outcomes in the very means he believes works. There is the outcome of some people having less wealth. Before we can even get to the outcome he has in mind, there are the outcomes along the way that he totally ignored because he doesn’t give a s#!t.
Of course he is too much of a coward to practise what he preaches, and he dares not steal from me himself, but if he tried, and the cosmos aligned, and for some miraculous reason he actually succeeded in stealing $1 from me, then before the outcome he has in mind takes place, there is the outcome of me being impoverished along the way. Time doesn’t stop. Ends are fleeting. As soon as one end is achieved, other ends become possible while others become impossible.
He can pretend in his warped religion of statist property ethics that he has “succeeded” in the goal of “Happier people”, but he destroyed actual desired outcomes of happier people because he has made a person unhappier. Now of course since Philippe is such a coward the only way he manifests his sociopathic tendencies is to merely have delusions and fantasies of certain people getting robbed. It is all he has. It is how he finds meaning to his pathetic life.
What I am proposing is so incredibly simple and is unclouded by envy, or hatred, or resentment: If we as individual human beings who think, feel and act as individuals want to each become wealthier, we can all do so at the same time through individual private property based production and exchange. When individuals have their property rights respected, and protected, the outcome of human interaction is necessarily geared towards mutually beneficial exchange. Nobody necessarily must become worse off, except through their own mistakes in judgment.
Is this an argument that I expect everyone to play ball? Of course not. Is this an argument that will guarantee it? Nope. Is this a prediction? Definitely no.
It is a meta ethic, that is, a minimum requirement for what is needed to at least safeguard each individual and allow them to make their lives better off through making their own choices for their own persons and property up to the point that they infringe upon the private property of other individuals, where those barriers are the extensions of others making their own choices about their persons and property.
What Philippe cannot yet tolerate is living in a world where he cannot benefit at the expense of others. I suspect he or someone close to him is on welfare or some sort of subsidy that was not earned.
At any rate, the irony is that the way Philippe acts, at least to me, is fully in accordance with the very property ethics he disparages in writing here. He does not threaten me with violence so that I give him my wealth. He depends on others to do his dirty work. But he acts as an anarcho-capitalist. So does everyone else on this blog. And that amuses me.
18. September 2015 at 10:29
Charlie, You said:
“I don’t see how targeting NGDP is going to result in a society that produces more food and medicine; whereas we do have concrete evidence that the free market does produce these things.”
Such wisdom! I’d go even further, free markets don’t provide those things, farmers and scientists do. No, that’s not right either, manufacturers make the medicine.
18. September 2015 at 14:16
OK, well, farmers and scientists and manufacturers working in a free market economy produce more than those working in other systems.
So again, if you target NGDP, how does that help farmers and scientists and manufacturers — and consumers?
19. September 2015 at 08:09
If you have to ask, you really shouldn’t be commenting here.
19. September 2015 at 16:46
See that everyone? If a commenter so much as merely questions the NGDP guy’s religion, he is asked to cease commenting.
This blog is by its owner’s declaration, intended to be an echo chamber cult.
19. September 2015 at 18:06
“For years, the Paul Krugmans of the world have been telling us the Eurozone Depression is so deep that monetary policy isn’t enough, we also need fiscal stimulus.”
Scott, I don’t get your obsession with Krugman. He agrees with you about the silliness of the silliness of the inflation hawks, talks about the Fed undershooting its supposed inflation target, did not oppose QE, had never doubted that conventional monetary policy can be effective when moving away from the ZLB. Why criticize him in a post about central bank stupidity?
And BTW when monetary policy is constrained in the amount of “unconventional” assets it can or will purchase, is it likely that it will offset fiscal stimulus?
20. September 2015 at 05:24
Thomas, The sentence you quote wasn’t intended to criticize Krugman, just show the wide gulf of opinion on this issue.
9. December 2015 at 23:31
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