Nighttime Must-Read: David Beckworth: Follow-Up to: The Fed’s Dirty Little Secret
Follow-Up to: The Fed’s Dirty Little Secret:
“Monetary regime change is hard…
…But why do we think that fiscal policy would work any better given the Fed’s dedication to its low inflation target?… If the U.S. Treasury Department sent $5000 checks… and… [people] began to spend… we would begin to see inflation go up…. The Fed would tighten…. For the same reason QE was limited from the beginning it also true that fiscal policy was limited from the beginning. With highly-credible inflation targeting central banks, both monetary and fiscal policy require monetary regime change to work at the ZLB. So I am puzzled as to why Krugman put his energy into drumming up support for more fiscal policy rather than drumming up support for a change in monetary regimes…