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The fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won't. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols... Very happy. Very good for the Fed. Congratulations, Mr. Bernanke.
My bottom line is that monetary policy should react to rising prices for houses or other assets only insofar as they affect the central bank's goal variables - output, employment, and inflation.
Monetary policy cannot do much about long-run growth, all we can try to do is to try to smooth out periods where the economy is depressed because of lack of demand.
Monetary policy itself cannot sensibly be directed at reducing imbalances.
A good monetary policy follows inflationary expectations and not historical numbers.
Monetary policy is not a panacea.
So just as I want pilots on the planes that I fly, when it comes to monetary policy, I want to think that there is someone with sound judgement at the controls.
Any debate among politicians about monetary policy is counterproductive.
Europe unified its monetary policy through the euro before it unified politically, therefore sustaining member countries' abilities to pursue the kind of independent fiscal policies that can strain a joint currency.
