I should preface this post by saying that I did not actually read the article from the Wall Street Journal by Jon Hilsenrath today since I don't have a subscription (online or otherwise) and the piece is behind the paywall. But, having heard about it on several different sites that I follow, I think I get the gist. Basically, Eric Rosengren, the President of the Federal Reserve Bank of Boston, came out with the suggestion of a Fed bond buying program that would be open-ended, until the inflation target is where they want it to be and the employment rate is back at normal levels. In other words, it sounds an awful lot like the NGDP targeting that I have mentioned before on this site. Money printing on steroids. And it's probably a preview of what's to come.
So, be that as it may, let's make a prediction. When this policy does get implemented, and we eventually end up with more painful bubbles that burst and a funding crisis in this country, the monetarists will be discredited. But some of the other jokers out there, such as Paul Krugman, who will initially be in favor of such policy, will try to cover their backsides and demonstrate how their particular economic theory still cannot possibly be falsified -- and the argument will go something like this...
"You see, we called for both monetary and fiscal policy to deal with the depressed economy. But, when we realized that those evil right-wingers in Congress would not budge in an effort to get Obama beaten at the polls, aggressive monetary policy became our best and last hope. But, deep down, we knew it wasn't enough. Rampant money printing and debt monetization just isn't precise enough, it's like a fire hose. What was called for was fiscal policy, to a degree and scope that would make FDR blush. So, bring on bigger government, I say!"
And cracker jack economics will find a way back into our lives.
