The staying power of a wrong idea

This article from the latest Economist is telling:

In the land of the blind the one-eyed Fed is king

Does it have to be this way? Not necessarily. Barack Obama or one of his Republican challengers may yet discover the courage to tell the truth about the American economy in next year’s presidential election. But given the politicians’ current uselessness, the only institution with the power to avert danger is the Federal Reserve. With interest rates so low, that means more quantitative easing. Printing more money is justifiable in the circumstances, but still a tool offering diminishing returns. Fiscal help would have been much better.

When I read the caption I thought “they got it”. But the ending was dismaying.

Where has fiscal stimulus helped Japan? It has a strong currency, an enormous debt, a lot of infrastructure built with “stimulus money”, like this airport over water.

But monetary policy has remained tight (despite interest rates close to zero) and inflation frequently on the south side of zero! Who, really, can help?

2 thoughts on “The staying power of a wrong idea

  1. Excellent blogging, really first-rate, concise, incisive commentary.

    In a way, I wish I had never found Mr. Nunes. Nunes reminds me how idiotic our Fed is,

    I envy my neighbor, who is a very nice and smart waitress. She agonizes little that the Fed is wrecking the economy, She does not know who is Bernanke-san. She works what shifts she can get at two popular restaurants, and her jobs seem stable.

    Sometimes, it is better not to know things.

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