Joseph Stiglitz on why monetary policy is useless in producing a robust recovery:
“They should know that [the Fed is] not going to make much of a difference. Anyone putting their hope in monetary policy … is just wrong.”
Stiglitz also believes the low policy push may be stifling job growth, even as it bolstered lending.
“There are some people that think that in a way low interest rates are making it more likely that we’ll have a jobless recovery.”
Read more: http://www.businessinsider.com/stiglitz-anyone-putting-their-hope-in-qe-is-just-wrong-2012-6#ixzz1ww177M00
His reasoning, apparently, is that increased business investment will mostly be directed at reducing the cost of labor via automation.
Scott Sumner on why monetary policy is the only approach that will produce a robust recovery:
In 2009 there were three groups, conservatives that opposed stimulus, Keynesians that favored fiscal stimulus, and MMs who said monetary stimulus is the only solution. Now the world is waking up to the fact that monetary stimulus is the only solution. Why? Just look at what 15 years of Keynesian stimulus has bought Japan
My view: good monetary policy beats lousy fiscal policy every time. Since the Fed is more authoritarian it is theoretically easier to implement good monetary policy than it is good fiscal policy which demand that Congress act. Unfortunately, I think there are social controls on the Fed which make it difficult for it to respond appropriately, i.e. in order to maintain repute they must do the expected thing.
I don’t think that either monetary policy alone or fiscal policy alone will solve our problems. Not only have they been operating at cross-purposes but neither producing nominal increases of GDP at five percent or more (if that is, indeed, possible) or spending any amount of money will produce the growth we need without some of the structural reforms we are desperate to put off. Hiring Phil Shipley to bury $1 trillion in his backyard will “spend” the money but it won’t do much for the economy.