Calculated Risk: Monetary Policy Confusion: An editorial in the WaPo yesterday - and some recent emails I've received - indicate there is some confusion on the difference between monetary and fiscal policy. From the WaPo yesterday:
Kicking the Fed: [B]uying hundreds of billions of dollars worth of federal debt in a deliberate effort to lower long-term interest rates and boost employment looks to many economists, market participants and politicians like fiscal policy by another name.
Calculated Risk says:
Well, these "economists, market participants and politicians" are confused.
Me? I don't believe these economists, market participants, and politicians exist. Expansionary monetary policy is when the Federal Reserve buys government debt for cash. Expansionary fiscal policy is when the U.S. Treasury sells government bonds for cash and uses the cash to fund its operations. See the difference between "buy" and "sell"? Buying something is not "like" selling it: it is the opposite of selling it.
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