Now imagine if monetary policy had been a bit more purposeful!
Update: Matt Yglesias takes on the subject and concludes:
Now maybe Fed officials are confused or lying or even fooling themselves in an effort to evade accountability. But this is what they say is going on, it’s a view they’ve articulated for years, and it’s a view that they’ve refined as time has gone on.Believers in full offset owe us a clearer account of why we should ignore the Fed’s testimony on this.
The reason to ignore the Fed´s testimony is very straightforward. History is full of examples of the Fed denying responsability for any “less than desirable” outcome.
Historinhas 
What a great chart. I do not understand the Cochranes and the Krugmans.
Moreover,we appear to be paying off the national debt without inflationary consequences.
Who knew?
I read your blog less recently because I think the debate is over. Recent events shows MP is potent at the ZLB, and sizable fiscal contractions can be offset by (non-ideal) monetary stimulus. History shows same, but more recent evidence is nice. Done. I can spend my time more profitably on less certain topics.
My interest shifts from the details of the debate to- what can we do about your profession?
Robin Hanson describes people as hopelessly bound by the hardwired tendency to form groups, and then to believe and speak things that raise the status of one’s group. And unlike most academics, he thinks a PhD doesn’t exempt you from human nature.
I’m 29. I read Hanson a few years back, and in my naivety, thought his ideas were exaggerated. But the more I see the more right he looks.
Yesterday, Stiglitz, acting as if 2013 never happened, said MP is impotent, fiscal stimulus needed, MP works through reducing long-rates, and that irrational speculators will blow bubbles if QE continues.
http://www.moneycontrol.com/news/international-markets/money-printing-futile-us-needs-fiscal-stimulus-stiglitz_1023634.html
Natural experiments are rare, we got some good ones recently and we’re unlikely to get better ones anytime soon. So if the opposing camps survive this intact, how does MM win? We need prediction markets.
Brendan — “Robin Hanson describes people as hopelessly bound by the hardwired tendency to form groups, and then to believe and speak things that raise the status of one’s group.”
Wow! Well said. Sounds right to me.
Hi, Marcus. Not sure I understand your graph. Looks like a strong fiscal uptrend either ended the recession, or didn’t. I think you want me to think it was the QE1 dot that ended the recession, but I’m not convinced things are so instantaneous.
Art, if you are “not convinced things are so instantaneous”, take a look at the charts in this post where the picture was originally placed:
https://thefaintofheart.wordpress.com/2013/08/01/evoking-the-spirit-of-keynes/
“The reason to ignore the Fed´s testimony is very straightforward. History is full of examples of the Fed denying responsibility for any “less than desirable” outcome.”
Well, OK, but – if the Fed has the power to completely return NGPD to its prior growth rate and path, and could do so just as easily as not do so, and knows it could do so, why would it choose a “don’t do it and then deny you can” equilibrium rather than a “do it and then take credit for it” equilibrium?
Because that would clearly show that they botched up to begin with! Better to say you´re doing your best!