Friday, January 13, 2012

Steve Williamson deals with a new paper by a Fed banker

"Death of a Theory" paper here. Steve reviews the paper here. Steve's money quote:
Things have changed since the financial crisis, however. Governments have been putting fiscal policy to use for stabilization purposes, and New Keynesians have jumped on the bandwagon. Bullard's paper argues, in light of the evidence and the economics literature, that the pre-financial crisis view is entirely appropriate, i.e. fiscal policy should focus on the long run and leave the short run to the central bank


OK,OK by now it should be clear we have run out of things to do for federal bailouts, here again is the history of 30 years of bailouts in the face of global competition:


Sooner or later, low Treasury yields mean something, mainly there are no obvious bailout schemes left.

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