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Discussion: (1 comment)

  1. Ali_Bertarian

    Monetary policy is one of the infinite number of combinations of factors affecting the economy. Mr. Pethokoukis prefers to think that the differences in culture, work ethic, government taxation, government-provided entitlements, and government regulations have no apparent affect upon the differences in the economies of the EU and US, leaving only monetary policy as the magic ingredient causing the manifested difference in industrial production and unemployment.

    But Mr. Pethokoukis should look more closely at his first graph, showing government deficits as a percentage of NGDP. The EU interest rate hikes occurred in mid-2011, but the EU was diverging from US deficits (as a percentage of NGDP) well before the start of 2009. There is something other than the Fed-inspired economic engineering advocated by Mr. Pethokoukis that affects economies.

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