The Six Myths of U.S. Monetary Policy During the Great Recession

Clark Johnson has written an article (here for smaller file size) that does a fabulous job addressing the six common myths about U.S. monetary policy since 2008. It is accessible but informed and should be required reading for anyone thinking about U.S. monetary policy.  I am adding it to my required reading list for my money and banking class.  It is really that good.

Here are the six myths Johnson addresses:

Myth 1: The Federal Reserve has followed a highly expansionary monetary policy since August, 2008.

Myth 2: Recoveries from recessions triggered by financial crises are necessarily low.

Myth 3: Monetary policy becomes ineffective when short-term interest rates fall close to zero.

Myth 4: The greater the indebtedness incurred during growth years, the larger the subsequent need for debt reduction and the greater the downturn.

Myth 5: When money policy breaks down there is a plausible case for a fiscal response.

Myth 6:  The rising prices of food and other commodities are evidence of expansionary policy and inflationary pressure.

Read the rest of the article.

This post originally appeared at Macro and Other Market Musings and is reproduced with permission.