Some people think that the current economic problems (housing bubble, etc) were caused by overly loose monetary policy and that the remedy is to tighten monetary policy now. Loose monetary policy was probably one contributor to the housing bubble (although I don't blame it for the current recession), but tighter monetary policy won't fix the recession. Even if it were a mistake, doing the opposite thing won't automatically fix anything. If you injure a friend's foot with an axe while cutting firewood during a wilderness camping trip and it gets gangrene, the best way to save your friend may be to cut it off with the axe rather than to forswear axe use entirely and do without firewood for heat and cooking. If you drive over a pedestrian, the solution is not to go into reverse and run back over them, but to take them forward to the hospital.
In the current situation, nobody has an actual model of the economy that explains why higher interest rates (and lower inflation) would be beneficial and yet some people are calling for it.
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