ABSTRACT
As we write (December 2009) a large majority of commentators are arguing that the US economy has now passed the trough of the current recession, and recovery is under way, with a possible return to a positive and large growth rate in GDP by 2010. According to the more widespread interpretations of the economic and financial crisis that started in 2007, its origin is either due to an exogenous shock that could occur with low probability, or to some kind of misbehaviour in the conduct of monetary policy. Accordingly, the problems that generated the crisis can be fixed in the medium term by a more stringent regulation of those segments of financial markets that misbehaved, and by a return to the Taylor rule for managing monetary policy. All measures that have been undertaken to sustain the economy in the short run, such as injections of liquidity in financial markets and fiscal expansion, are seen as potentially dreadful in the medium term, requiring – sooner than later – a change in policy to eliminate the threat of inflation and to reduce public debt.
