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I have to agree that monetary stimulus alone isn't enough. Some call this the "zero lower bound" and that fiscal policy needs to drive inflation. https://en.wi

• danieltillett 11y ago
  You can have negative interest rates (Switzerland and Sweden currently have them) so the zero lower bound does not need to exist. Of course monetary stimulus only works if the banks decide to actual lend all this cheap money. If they don’t then the money just piles up on their balance sheet and has no effect on aggregate demand.
  • yxhuvud 11y ago
    Sweden has negative rates when loaning in money, not when loaning out money. That is, they are not violating the zero lower bound - they are simply a bit closer to it.
    • danieltillett 11y ago
      The Swedish negative rates are for banks borrowing from the central bank, but in theory there is nothing stopping banks lending money to individuals at a negative interest rate. In a deflationary environment such loans will still have a positive real interest rate. The banks of course would only do so if the negative interest rate was less than what the central bank charged.
• Symmetry 11y ago
  That assumes that alternative tools like Quantitative Easing are not available. Central banks don't like to engage in Quantitative Easing because it hasn't been done very often and central bank models of it aren't very precise but it has certainly had an effect when tried. https://en.wikipedia.org/wiki/Quantitative_easing https://en.wikipedia.org/wiki/Quantitative_easing