Not all readers of this blog have been reading it consistently for the past few years, and as I read some of the comments it’s clear that many people don’t know where I’m coming from on macro issues. So it may be worth reiterating a point I’ve made before — that I’ve actually been very consistent on this stuff, and that there’s a simple model underlying almost everything I write about macro.
And I had worked out the implications of a liquidity trap long ago. In a liquidity trap even large increases in the monetary base aren’t inflationary; even large government deficits don’t drive up interest rates.
And so it has proved:
![DESCRIPTION](http://research.stlouisfed.org/fredgraph.png?g=he)
![DESCRIPTION](http://research.stlouisfed.org/fredgraph.png?g=hg)
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