Doug Irwin has a good take on market monetarism

I believe the ‘core paragraphs’ of Doug Irwin´s FT comment are these two (my bold):

Some US economists have been pushing for more fiscal stimulus because they believe that, with interest rates close to zero, monetary policy is out of ammunition. If interest rates are already so low, they cannot be cut further to stimulate business investment. These economists make the error of taking lower rates as the main channel by which monetary policy affects the economy. Friedman and market monetarists believe that monetary policy is never out of ammunition and that further actions can help the economy by increasing asset prices, which improves households’ and businesses’ financial position.

Market monetarism draws lessons from the Depression to demonstrate that cutting interest rates is not vital in promoting economic recovery. After 1933, when interest rates were at extremely low levels, US monetary policy promoted a strong recovery because gold inflows allowed the monetary base to expand. This did not further reduce interest rates, but the economy recovered nonetheless without significant inflation. We know this because when the Treasury began in 1937 to sterilise the gold inflows, halting growth in the monetary base, interest rates did not soar but the economy suffered a massive relapse in the sharp recession of 1937-38.

Lars Christensen also commented

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