Did Monetarism work in the early 1980's? Is it a Quack Philosophy?

[Measure_for_Measure]

@deltasigma

I don’t have much interest in the purely academic topics since they don’t do anything to inform the trades I make.

Ok, then the problem was terminological. I was referring to a near-dead theory.

But you’re dead wrong about the vast majority of people not believing that the unending rounds of QE were going to create their own kind of financial Armageddon. I suppose you don’t remember gold going to over $1800 and ounce - as just one example.

My understanding is that gold is a sideshow, insofar as global asset allocation is considered. Also, you would expect the prices of non-interest bearing assets to rise when real interest rates collapse.

We’re drifting off topic here but many of these issues were discussed in real time on this and other message boards. Here’s a thread you might enjoy from July 2010, after vast expansions of the Fed balance sheet: The BBQ Pit: So where’s the inflation, fucktards? My opening salvo:

@Measure_for_Measure

Personally, I think the fears of hyperinflation that were circulating a year ago were delusional (or, rather, they were based upon a framework that has been resoundly refuted.) I find it highly plausible thought that core inflation could go to 3-4% – heck I think core inflation should go that high, so that we can avoid liquidity traps in the future. But 3-4% inflation is nothing to get hysterical about, unless you are predisposed to that emotion anyway.

Scylla: " I can’t recall any credible analysts seriously predicting “hyperinflation.” Are you sure that’s the word you mean?"

MfM: “My understanding is that serious analysts were receiving questions from their clients regarding, yes, hyperinflation which they politely batted back. It was unclear to me whether the confusion was due to economics or the clients’ confused definition of hyperinflation.”

Plus I just checked wikipedia for liquidity trap and it seems to be regarded by many economists as a fiction which only came back to prominence in the 90’s when Japan lowered rates to zero and it had no effect. But as I said, I read and listen to the financial press pretty extensively and I don’t think I ever recall the term being mentioned in relation to QE.

Once the Fed funds rate drops to 0.25%, you have left the realm of conventional monetary policy. While Bernanke c. 2002 thought that this wouldn’t necessarily be a problem (arrange a helicopter drop!) I don’t think this was a matter of settled opinion. One ~1970s-1990s macro text I recall opined that it wasn’t clear whether there was a liquidity trap during the Great Depression, “But there certainly isn’t one now”. Still, it was a notion that made it into intermediate macro texts. Admittedly, I skimmed a few of those texts some time back and realized that my undergraduate professors had emphasized the concept more than most, not that they were especially fixated on the topic.