Monetarists, Fiscalists and ZLB

Someone ticked off Krugman about the Zero Bound on interest rates making the government banker ineffective.

ZLB Denial

Yes — if back in 2007 you denied the existence of liquidity traps, that is, denied that the zero lower bound on short-term interest rates places limits on monetary policy, you should long since have acknowledged that you were very, very wrong. 

For the record, the central banker did not cause our thirty year decline to zero, their capital owners did (and the central banker enabled).

But the monetarist issue is, can the central bank ever have long term positive benefits for the economy by 'luring us with future growth estimates'. Well, not if it wants to send rates below zero, the finance community is positive definite. Can the central bank ever do anything long term? Yes, right at the crash points, or expansion points when it is portfolio adjustment time. When finance and government are taking losses or gains, then the fiat banker has real power. But in our case, the banker is owned by government, and government is 23% of the economy.

When does fiscal policy help? Well, for one thing, federal fiscal policy caused the thirty year decline to ZLB, a well established point I think. Further, the banker keeps us at ZLB to over fund government, its capital owner. So, until the fiscalists establish an alternative theory for the thirty year decline, their fiscal predictive powers are suspect. That leaves the Krugmanites with selecting from a set of known choices, in the past. And there it is, the Clinton policy staring them in the face. The only way the fiscalists can make their case is higher taxes and spending cuts, sequester and tax; and Obamacare makes that tough.