Conventional Thinking at the Brink (by Clark Johnson)

From the day I started my blog I have always been happy to invite other economists to contribute to my blog with guest posts.

Today I can present something even better than a guest post. Today I can present a new paper by Clark Johnson – “Conventional Thinking at the Brink: Comments on Ben Bernanke’s The Federal Reserve and the Financial Crisis (2013)”. Clark in his great paper comments on Ben Bernanke’s book “The Federal Reserve and the Financial Crisis”. 

While I obviously do not agree with all of Clark’s points the paper is as usual very informative and insightful. Clark remains an extremely knowledgeable scholar with a deep insight into particularly monetary history.

Enjoy! You can read Clark’s paper here.

Lars Christensen

PS I have earlier published Clark Johnson’s paper “Keynes: Evidence for Monetary Policy Ineffectiveness?”


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  1. The pdf of Clark Johnson’s paper “Keynes: Evidence for Monetary Policy Ineffectiveness?” is much larger (in kilobytes) than it should be.

  2. TravisV

     /  April 21, 2014

    I read Johnson’s paper and asked Prof. Sumner the following question:

    Prof. Sumner,

    Clark Johnson wrote the following (in the paper you linked to):

    “I believe Bernanke means that QE would lower real long-term rates. According to market participants, Fed QE announcements tend to raise inflationary expectations, thereby raising nominal rates on 10- and 30-year bonds.”

    I think this deserves more discussion from you. In particular:

    (1) Do you personally believe that QE3 has put downward pressure on real long-term interest rates (seems doubtful to me)?

    (2) Has Bernanke or anyone else on the FOMC EVER distinguished between the effect of QE on nominal rates vs. its effect on real rates?

    It sure seems like there’s very little actual evidence supporting Clark Johnson’s argument above. Why do Bernanke and Yellen keep saying that QE lowers long-term rates even though the truth is closer to the opposite? My theory: they say it because it sounds more appealing than “increase expectations of future inflation.” It’s all about selling the QE approach in a way that the general public feels like they understand (even though they don’t).

    Sumner’s reply:

    “Travis, As I’ve watched policy over the years, there doesn’t seem to be any consistent pattern between monetary policy and rates. Sometimes stimulus lower rates and sometimes it increases them. All we really know is that extreme stimulus (creating lots of inflation) will raise rates.”

    My reply:

    “Are you referring to nominal interest rates or real interest rates?”

    Sumner’s reply:



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