Technological Regress in the Thinking of William Poole

When I knew William Poole in the 1980s, it was very clear that he was not a devotee of the Treasury View--that he believed and understood that the interest elasticity of money demand was not zero, and hence that expansionary fiscal policy could spur production and employment.

Now he has forgotten what he once knew, and retreated to the position R.G. Hawtrey assumed in 1926: 82 years of progress in monetary economics thrown away:

William Poole: The self-correcting nature of markets will ultimately prevail. We should not underestimate the power of monetary policy; with the sharp increase in the nation’s money stock starting in September, monetary policy is now extraordinarily expansionary. I believe, though without great confidence, that the recession will end in the second half of this year.... [G]overnment spending can’t lead the way to sustained recovery, because its stimulating effect will be offset by anticipated higher taxes and the need to finance the deficit.

Poole is implicitly predicting a large and rapid rise in Treasury interest rates in the future as the spending from the fiscal boost package hits the economy--excuse me, Poole is implicitly predicting a large and rapid rise in Treasury interest rates in the past as markets realized that the Obama bill was going to get through congress. Yet the failure of his implicit prediction does not faze him at all.