If you’d told me that we would go through a massive financial crisis where monetary policy was proven to be an extremely blunt instrument, I would have bet that the thinking about monetary and fiscal policy would change. But I don’t think that’s what’s happening at all. In fact, from what I gather on the policy front it seems like it is the monetarists (in this case, the market monetarists) who are winning. Not only are they gaining momentum in the research front (as the recent Woodford ruckus proves), but they are gaining momentum with Washington. After all, David Beckworth and Scott Sumner have been busy spending time in Washington briefing staffers.
I guess you could say, the more things change, the more they stay the same. And you know what? If the economy continues to expand following QE3 it will almost certainly be heralded as a huge success for the Federal Reserve….I like to think we learn from our mistakes. But that’s just wishful thinking.