It’s Still Not About Monetary Conspiracy Theories

I see that Paul Krugman is complaining again about an op-ed that Paul Ryan and I wrote in Decmber 2010.  I responded to Krugman back in February of this year when his complaints first appeared on his blog and in his New York Times column. But rather than deal with the economics of the response, he now again resorts to the same old claim that the article was promoting “monetary conspiracy theories.”   This is absurd.  Our op-ed said nothing about a conspiracy, it had no discussion of individuals, and it made no mention of people conspiring or even talking with each other. Our op-ed raised concerns about the ineffectiveness of quantitative easing and about the departure from rules-based policy—concerns expressed by many people then and now. Our op-ed also said that an upcoming round of “QE2 will create more economic uncertainty” and that quantitative easing operations “involved the Fed in areas of fiscal policy, such as credit allocation,” which were the proper role of Congress. Of course, we now know that QE2 was followed by QE3 about which even more questions about ineffectiveness have been raised.

In his blog post earlier this year Krugman also claimed that the only evidence of ineffectiveness we had in 2010 (when we wrote the op-ed) was that the economy did not strengthen. But there was and is evidence, including econometric research by Johannes Stroebel and me, later published in the International Journal of Central Banking, not to mention basic finance theory as explained here by John Cochrane.

These are issues that economists and others can research and discuss, but they are not about conspiracy theories, even if you try to tie them into current political campaigns as Krugman does in his most recent foray.

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