If the Fed is targeting inflation, then there is no liquidity trap, no paradox of thrift, no paradox of toil, no fiscal multiplier, no “Depression economics.”
That is from Scott Sumner, Q.E.D. The rest of the post is about Switzerland, sort of. Scott also reports in a p.s.:
The CA data is from the most recent issue of The Economist. They also report that the consensus forecast for RGDP growth in the US is 2.1% in 2012 and 2.2% in 2013. Because we are in a recovery, that’s obviously higher than the consensus forecast of trend growth. In other words, most economists now see the US trend rate of RGDP growth as being something like 1.5%. After 150 years of 3% trend, that’s a startling downshift. Tyler Cowen is no longer a contrarian; The Great Stagnation is now conventional wisdom.