When unemployment rises the economy seeks lower velocity

That process is contractionary. The contraction was well under way before all the nuances of Fed policy were being debated in late 2008. By June of 2008,  unemployment in California had jumped two points.

When labor gets laid off, labor conserves liquidity, it reduces short term debt and reduces velocity. Oil prices are still rising. There is nothing in Scott Sumners economic journals that can change the facts.

The stock market sees lower sales which is lower earnings and drops in stock values.   What should the Fed do?
If the economy wants to reduce velocity, then lower rates helps it do just that. If Scott wants to stop the process, then holding rates at 2% in Sept of 2008 seemed to slow the contraction, but layoffs continued.


If the economy wants lower velocity, the Fed can lead the way down, with a rate cut. If the economy wants higher velocity the Fed can lead the way up with a rate hike.
WIlliamson is correct.