A new monetary policy for the 21st century

For the past seventy years, policy makers have relied on fiscal and monetary policy to combat recessions. Monetary policy works by lowering real interest rates and stimulating private expenditure. Since the nominal interest rate on three month treasury bills has now reached zero in the US, the scope for further easing is limited. This has led to an intellectual tsunami of proposals for a Keynesian-style fiscal stimulus of historic proportions.