U.S. Monetary Policy and the Prospective Structural Slump

Abstract

It was a huge mistake to see monetary policy as a static problem of engineering the desired balance between unemployment and inflation. The cyclical phases of economic expansion and contraction do not repeat themselves the same way twice in a row, so the monetary and fiscal remedies that worked last time should not work this time.

Keywords: Taylor Rule, fiscal policy, Great Recession of 2008, monetary policy, Freidrich Hayek, Keynes, asset inflation, housing bubble, FED policy, money supply

JEL Classification: Cll, C20, D40