Monetary Policy

["Alex Izurieta" <Izurieta@xxxxxxxx>]

Quoting from Michael:

I am seeing more and more stories doubting that a recovery is on the
near horizon.  Notice the quote below

"We think the economy has got
real problems that won't be
rectified quickly," said William
Dudley, an economist with
Goldman Sachs & Co. in New
York. "We think monetary policy
in this environment is not very
effective."

I think that the smashing of Greenspan's myth, along with the possible
failure of monetarism and tax cuts, may open up the possibility that
people might be receptive to a substantive dialogue about the economy.
Certainly it will make teaching easier next week.

My comment:
Of course I agree with your remarks, Michael (well; monetarism is
ineffective per se; tax cuts / fiscal spending not, but are in this case
insufficient and badly distributed...). And I hope as well that there would
be more serious discussion about the economy. However, I guess that there is
lot of pressure on the media (and all types of 'consulting' bureaus) so as
to give the public the impression that a recovery is imminent.

That is why it surprises me the quote you made above. (Could you please, on
a personal note, send me the exact reference? We may need to 'use' it).
Actually, there was recently a whole article produced by Goldman Sachs ("The
Un-Godley Private Sector Deficit", US Economics Analyst, 27 July) where they
were trying to argue precisely the opposite: that of course things are not
rosy, but that a recovery would follow suit, and that monetary policy is
effective... We actually included a rejoinder in our web site on this
occasion, and subsequently we were contacted directly by G&S...

In conclusion, it all points, day by day, into a direction that confirms the
analysis deployed in the "Implosion ..." paper and elsewhere (e.g. Dean
Baker had an insightful presentation during the URPE Summer school). On the
other hand, it looks to me that there is a lot of people out there who would
(perhaps) agree but *will not* acknowledge the seriousness of the situation
to avoid making matters worse precisely at the moment in which policymakers
are trying to sell the image that their recipes are being effective...