It was good to see Paul Krugman's response to my previous post. We agree more than we disagree, I think. We need to move outside the Neo-Wicksellian perspective if we want to look at monetary policy where short-term interest rates are already at zero. You can't use a model which contains i a...

As interest rates approach zero, and central banks look at "unorthodox" monetary policies, the Neo-Wicksellian perspective on monetary policy has switched to a blank screen. We are witnessing the return of Monetarism. That's the main reason why economists find it hard to think about un...

Tim Duy wonders how long it will be until the Fed gives up on the idea that financial engineering can resolve the problems in financial markets: When Does Faith in Financial Engineering Wane?, by Tim Duy: The data flow is truly horrible, painting a picture of an economy so weakened that it promises ...

Janet Yellen discusses a report on "the macroeconomic implications of oil price movements": Discussion of “Oil and the Macroeconomy: Lessons for Monetary Policy� by Janet Yellen, President, FRB SF1 : It’s a pleasure to discuss this thoughtful and comprehensive report on the macroecon...

One more from Tim: Lowering the Bar, by Tim Duy: From the terms of the Capital Assistance Program: As part of the application process, banks must submit a plan for how they intend to use this capital to preserve and strengthen their lending capacity – specifically, to increase lending above levels...

* There were two shootings in St. Louis City on Friday night.  However, they took place where you might not expect, but if you keep up on the decline and fall of St. Louis, you won’t be surprised.  One was on Potomac and Michigan, and the other was on the 3700 block of Iowa. * It looks like ...

Martin Wolf - FT.com What has Japan's "lost decade" to teach us? Even a year ago, this seemed an absurd question. The general consensus of informed opinion was that the US, the UK and other heavily indebted western economies could not suffer as Japan had done. Now the question is changing to whether...

A call to prick bubbles before they get dangerous by setting bounds for asset prices, and taking corrective action when prices move outside of the designated range: Put the puritans in charge of the punchbowl, by Arvind Subramanian and John Williamson, Commentary, Financial Times: The ... idea of Al...

In 2003, Alan Greenspan argued that the Fed needed to set low interest rates to prevent falling into a liquidity trap and deflationary spiral. (H/T commenter Declan). In 2008, Greenspan's critics argue that those same low interest rates caused an asset bubble, which burst, causing the economy to...

Tim Duy: Waiting For Geithner, by Tim Duy: Treasury Secretary Timothy Geithner is slated to announce the latest financial stabilization plan Monday.  From various press reports and leaks, these are things to be looking for: 1. No bad bank.  The plan appears likely to leave toxic assets i...