The End of Keynesian-Monetarist Theory
QUESTION: Thank you for your great work. I have read this article where Kudlow says: White House economic adviser Larry Kudlow predicted that it is possible the Federal Reserve won’t hike interest rates again during his lifetime: My question is do you think he is right? And what will the consequence be if the interest rate remains where it is – For example, the next 10 or 20 years?
P.S. Of natural causes, we do not know how long time Kudlow lives.
Best regards
L/Sweden
ANSWER: Perhaps he got bad news from his doctor or it is a political statement that is just absurd. What he is really saying is that Quantitative Easing has so destroyed the Keynesian model that there is now no other alternative for central banks to control the economy. If they raise rates, the budget explodes. We are witnessing the end of Keynesian.Monetarist theory.
