Excellent post… unless you believe in fairy tales like the natural rate of interest, NAIRU, the money multiplier, monetary policy’s role in the so-called “Great Moderation” and the ability of all nations to run balanced budgets at all times.
The Crash of 2008 is often blamed on the Fed’s overly ‘loose’ monetary policy after 2001. In short, the argument goes, American monetary policy was too ‘loose’ for four years between 2002 and 2006; and too ‘tight’ once the Fed realised that it was presiding over an unsustainable boom. In this post the reader can read a long article (click here for the complete pdf) in which I debunk this simplistic, and fatally flawed, theory.
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