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Good summary of the argument. I'll just note that this: > The reason why Keynes was wrong is that the 'liquidity trap' is not a real thing. Second, even if it
by _Tev 8y ago
Good summary of the argument. I'll just note that this:
> The reason why Keynes was wrong is that the 'liquidity trap' is not a real thing. Second, even if it were real, the government fiscal policy would be unable by itself to raise AD and keep it raised.
... is something many people would disagree with, especially as you provided no data to back it up.
It's of course topic for longer discussion, I am just pointing out where is the disagreement.
- nickik 8y agoWell, its a hacker news comment. However I can tell you that evidence of the fiscal multiplier has been a terrible and if you look at where monetary policy was contracting fiscal multiplier is negative. Also, there are tons of countries who already have successfully eased monetary policy at the ZLB. Switzerland, Denmark, Sweden and so on. It was also in all monetary textbook before the crisis and was considered standard knowledge by many monetary economist. Even people like Krugman would agree that with setting a higher inflation target the Fed could have been more aggressive.