Two Nobel Prize winners, 18 years apart
By Scott Sumner
Here’s Milton Friedman in 1998, talking about Japan:
Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy.
. . .
After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.
And here’s Joseph Stiglitz, in 2016:
Lowering the interest from 5 percent to 0 didn’t bring a robust recovery. Lowering it from 0 to minus 1/2 percent isn’t going to do it either.
I can still remember when economists knew the difference between interest rates and monetary policy.
But each year, it gets a bit harder to remember.