This chart says more about monetary policy than fiscal policy

Veronique de Rugy and Keith Hall show that the difference in RGDP growth between the second and third quarters was all due to increase in government spending. We know that growth in government spending was almost all attributed to a rise in defense spending; so unless the US ventures into a new war (always possible) there´s not much hope of continued increases in Gov. Purchases (the ‘fiscal cliff’ is just around the corner). Maybe Sandy will have a ‘positive effect’ (!)

So what the chart really tells us, given the behavior of private sector output, is that monetary policy remains ‘pathetically guarded’.

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