Monday, November 10, 2008

Lets hear it for easy Al

My old friend George Selgin goes after Alan Greenspan and also makes sense about how to judge the stance of monetary policy:

"one cannot accurately gauge the easiness of monetary policy by looking at money-stock measures alone. Instead, one must look at measures that indicate the relationship between the stock of money on one hand and the real demand for it or, if one prefers, its velocity. What matters isn't how rapidly the money stock grows, regardless of how one chooses to measure it, but whether its grows faster than the public's demand for real (that is, price-level-adjusted) money holdings. Even a low, a zero, or a negative absolute growth rate for some money-stock measure can prove excessive if demand for the monetary assets in question is declining. Regarded in light of this consideration, Greenspan's monetary policy was in fact "easy," as I will endeavor to show."

Nice job George and congrats on your move.