At the Cato Institute Monetary Policy Conference, Part 1

Photo Credit: Xerones

Photo Credit: Xerones || A passing comment on Monetary Policy — Zero

Got here late. Traffic and parking in DC have gotten worse since I used to work here eight years ago.

Missed James Dorn of the CATO Institute, and now James Bullard, President and CEO, Federal Reserve Bank of St. Louis is talking.

He’s arguing that monetary policy has been too loose for too long, though a zero percent policy was needed for a time.  Cites this paper here.  Gives a confusing neo-Fisherian model — simple models don’t do justice to a complex economy.  Argues that low rates lead to low price inflation.  (Personally, all of this neglects demographics, and the relative propensity of monetary policy to funnel marginal money into asset or goods markets.)

Monetary policy near the zero bound creates its own demand for abnormal policy tools.  Thinks that economy is pretty normal now, and there is no need for excess stimulus now.  Thinks that current policy will lead to bad results if maintained.

Q&A — Selgin of Cato — Says Fisher would spin in his grave, that public natively facilitates Fed policy, which is not natural.

Fisher argues that you have to have an equilibrium concept in economics.  How than to explain low rates and low inflation.

Q2 — Politics and the Fed — what does he think of GOP candidate comments?

Says that Fed can work with them.

On to the next panel.