Is the Fed able to offset “austerity”?

David Beckworth serves up another very good blog post and directs us to this graph of nominal gdp; it seems aggregate demand has been recovering steadily:


Scott Sumner directs us to Marcus Nunes, but here is a quotation from Scott:

In 1937 real government purchases recoiled 4.2% and the economy tanked. In 2012 real government purchases were 4.8% below the 2010 level and the recovery is slow!

Surely something is going on that´s making comparable ‘fiscal austerity’ so much less damning in 2012 than in 1937.

And that ‘something’ is monetary policy.

Here are further remarks from Scott.


Comments for this post are closed