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Bush-Obama-Fed Great Stagnation

September 3, 2013
John B. Taylor has asked What to Call This Very Slow Recovery? In a post that pre-dates the Taylor question, I had suggested the Bush-Obama Great Stagnation. This suggestion was based on discussions in Mises Daily referring to 1929-post WWI as the Hoover-Roosevelt Great Depression and an excellent QJAE paper written circa 2009 by Mark Thornton who makes the Bush-Hoover connection (“Hoover, Bush, and Great Depressions). More recently, while I was working on a forthcoming Daily providing more evidence on why Krugman is wrong about the Austrians and ABCT, I amended this to the Bush-Obama-Fed Great Stagnation. Steve Horwitz’s commentary in a new blog at LSE, provides support on why the Fed belongs on the list of usual suspect. Horwitz argues that “post 2008 Fed policy has contributed to the excessively slow recovery while creating significant problems moving forward.” Titled “The Fed’s monetary policies since 2008 have undermined the creation of a growth-producing economic environment” he further argues, “that by paying a small amount of interest on reserve balances, the Fed has discouraged banks from lending, leading to a de facto bailout program. Now, the Fed faces the very real problem of how to avoid inflation as QE ends and recovery begins.”

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