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The debate between active and passive monetary policy is mentioned in most macroeconomics textbooks. Where does the current debate stand? Has a consensus been reached among economists? Do economists today broadly agree that one is better than the other, or, at least that one is better than the other in certain situations etc.?

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I would like to think so, Monetary policy has changed since the creation of the Federal Reserve. There is a big difference in business cycle frequency and magnitude since post World War II, see attached image.

Nominal U.S. GDP

image source: McGee, Robert T.. Applied Financial Macroeconomics and Investment Strategy (Global Financial Markets) (p. 18). Palgrave Macmillan US. Kindle Edition.

This can be attributed to demographics, technology and other secular influences. However, I like to think this is also do to the Fed learning from the past and is slowly getting better and controlling there mandates. Some argue that we where headed towards another depression in 2008, but the Fed offsetting the money multiplier with QE to keep money supply relatively stable.

Of course there are plenty that would disagree with me, but I don't claim to be a economist, I am a investor.. Then again most economist are busy disagreeing with each other to bother arguing with me.

Cheers, Aaron

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