mbs: Not necessarily. You can believe that both monetary & fiscal policy are effective in principle, while recognizing that the Fed (i.e., Big Al) can act instantly while the Fisc (Congress & the President) can take forever. Politics hampers fiscal policy. In a saner time fiscal policy might be more deliberately exercised.
. . . I wonder how the salience of Greenspan's role will play out in the poltical arena. Has monetarism won? What role can be pitched for fiscal policy if the bankers are held to have delivered the goods?
mbs: G-span is not a monetarist, strictly speaking, nor is anyone who thinks monetary policy is important necessarily a monetarist. Monetarism holds that the best policy is a non-discretionary, fixed growth of the money supply. This is pretty moldy doctrine at this point. G-span is more of a seat-of-the-pants guy, his Ayn Rand philosophical background notwithstanding.
You could say the Fed has won in the sense that the capacity of Congress to act is in deep doubt, and even if it could the Fed could act faster. This does not mean the Fed deserves total credit for the boom. One has to presume that however fiscal policy ended up had a positive influence, even if it wasn't deliberate, not unlike Reagan's 'keynesian' impact on the economy in the 1980's. The Fed has also won politically, insofar as its elitist position has public support.
I reiterate a point I made here before, that since the Fed and president adhere to an economic doctrine that four point oh unemployment is bad, and since the former has taken steps to raise that rate and the president has not discouraged him, they do not deserve credit for that level of unemployment.
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And assuming that economic analysis can be relatively
detached from a political agenda (and in these pomo
times that might be characterizecd as a tossing of an
unsubstantiated assertion, merrily so), uh, has
monetarism won? If infrastructure spending,
tax expenditures, wage hikes, etc. have played
either no or a small role, has the ghost of Keynes
been vanquished? Dennis Breslin
I would call it Fed supremacy, not monetarism. For the time being the Fed is clearly on top and will continue to be, short of recession or worse. Only then will its expertise and neutrality be open to question in a serious political way.
There remains my advocacy of a Campaign of Bitter Recriminations for letting the unemployment rate slip (if it does), from four to five and a half. That margin has an outsize implication for economic justice and deserves much focus.
I might note that Prof DeLong blames the Fed for the current signs of downturn in his latest net column. Perhaps he will hold forth on the current status of monetarism in the profession. My impression is that it has achieved relic status. I would guess that there are all sorts of new reactionary doctrines about.
mbs