The Macroeconomic Situation and How We Got Here

Back in December 2008 I thought that prudent macroeconomic policy--policy geared to deal with a 20%-percentile outcome, that could then be cut back if and when it turned out that we had good or even neutral look--involved (a) a $1+ trillion fiscal stimulus, (b) the Federal Reserve taking the size of its balance sheet from $2 trillion to $3 trillion, (c) the Federal Reserve adopting a 3% annual inflation target and taking active steps to hit that target, and (d) the Treasury using its...