There is a simple idea that frames some of the biggest economic questions of our time and helps to clarify the positions and the stakes in the deepest disagreements over policy. It is that the “[Wicksellian] natural rate of interest” has fallen sharply; what you believe about why this may be determines much of what you believe is the appropriate policy response.
I wrote this two months ago:
The macroeconomic theory everyone seems to be working with (still) is the Wicksellian natural rate of interest. Paul Krugman mentioned it today. It really does create a unifying picture the various views of quantitative easing. Imagine it as the last common ancestor of Austrian, Keynesian and monetarist theories of economics.
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