You just can’t beat this closing, in my mind’s eye it was complete with a mic drop and Scott walking off stage right.

Monetary policy should always be set in such a way as to produce on-target expected NGDP growth.  That’s the Lars Svensson principle.  If you do that, there’s no room for fiscal stimulus, even if the economy is currently depressed.  With a central bank that targets expected NGDP growth along a 5% growth path, you are in a classical world.  Spending has opportunity costs.  Unemployment compensation discourages work.  Saving boosts investment.  Protectionism is destructive.  And so on.  That’s the policy we should be teaching our grad students.  The optimal monetary policy.  Not a policy mix that only has a prayer of making sense in countries where the central bank is even more stupid and corrupt than the Congress.  As far as I can tell, those countries don’t exist.

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