Morning Must-Read: Tony Yates: John Taylor the Republican Contradicts John Taylor the Economist
The question as to whether one actually believes the models one teaches, and tries to apply the principal conclusions that follow from them, or regards them as ritualistic incantations to be dropped as soon as they contradict one’s ideological instincts or the preferences of one’s political masters… this is more and more coming to seem to me to be a key issue:
…with tighter monetary policy, and greatly tighter fiscal policy. And the other smoking guns causing the crisis (lax regulation, global imbalances, irrational exuberance, politically motivated lending to subprime borrowers, etc) were a sideshow…. Taylor’s remarks sounded like a classic Republican critique of monetary and fiscal policy… objected to QE, fearful that it would stoke up inflation… objected to the stimulus package because it went against their preference for small government. But this Republican critique flies in the face of Taylor’s… work took on the causes of the business cycle, what monetary policy can do about it, and, by very close analogy, what fiscal policy can do too…