Bring back Scott Sumner

Trawling through the archives

Suppose you have a crystal ball, and are given one peak at the future, say May 2011.  But you are only allowed to look at one variable—and it’s not the Dow, it’s the fed funds rate.  Now suppose I tell you the following, it will be one of these two numbers:

a.  0.25%

b.  3.75%

…If I looked into the ball and saw 0.25% fed funds rates in 2011, I would have a sickening feeling—like I’d been punched in the solar plexus.  Krugman would be right, we’d be another Japan.

Its no longer May, its June, and we remain in The Little Depression.

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2 thoughts on “Bring back Scott Sumner

  1. One day I would like to ask a real macroeconomist why, if you are facing high unemployment, low underlying inflation, and worries about government debt, you cannot annouce a one-off purchase and cancellation of outstanding government debt with freshly printed money, accompanied by some temporary infrastrcuture-building job creation programs. That would be inflationary, loose monetary policy … I know you can’t get into the habit of monetizing the government debt, but why not as discretionary monetary policy in current situation?

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