Over at Equitable Growth: Larry Summers says that he is disappointed along three dimensions at what came out of the Federal Reserve's Jackson Hole Conference. I think Summers is right to be disappointed. Indeed, from my perspective, it was disturbing that there was not more connection between the academic papers on how the monetary policy toolkit might be expanded and the policy discussion.
Summers's view is that the policy discussion is seriously awry: "near-term policy signals... on the tightening side... will end up hurting both the Fed’s credibility and the economy.... The longer-term discussion revealed... dangerous complacency about the... existing tool box.... [And] failure to seriously consider major changes in the current monetary policy framework..." I think that gets it right:
- The Fed appears to me to be dangerously complacent,
- Both with respect to the short-term macroeconomic situation,
- And with respect to its ability to stabilize the economy over the longer term;
- Hence its current policies appear to me to be dangerously blind to current realities,
- And it is not seriously engaged in setting the stage so that the successors of current policymakers can have a chance at a quiet life. Read MOAR Over at Equitable Growth: