Inflation Isn't the Point of Monetary Easing | Timothy B. Lee | Cato Institute: Commentary

Inflation Isn't the Point of Monetary Easing | Timothy B. Lee | Cato Institute: Commentary: "In late 2008, the Federal Reserve screwed up and allowed the left-hand side of the equation, MV, to decline sharply."

They only control M and AFAIK it hasn't declined sharply.

"while NGDP fell by much more than that. Math tells us the rest of the decline had to be absorbed Q declining."

Sounds backwards. Falling NGDP didn't cause production to drop -- dropping production cause NGDP to drop.

"In other words, because prices didn’t fall fast enough, we got layoffs instead."
The government artificially restricts falling prices (especially labor)

"by expanding the money supply (M), the Fed can increase MV, which will necessarily increase PQ"

Since the Fed doesn't control V, increasing M can decrease V and not increase MV. So increasing M doesn't necessarily increase PQ. This is basic math and logic...

"If the economy is already humming along nicely, there’s not much room for Q to increase"

Productivity increases constantly increase Q and decrease P even(especially?) in a good economy.

"But if the economy is in a recession, with lots of idle workers and factories sitting around, then monetary stimulus will cause an increase in Q"

Workers and factories aren't easily changed to drastically new uses. It isn't easy for idle construction resources to be moved to manufacturing.

"We just need to convince them that a bit of extra inflation is a price worth paying for getting people back to work."

Getting people back to work is easy (force labor, drop pay, etc) but increasing NGDP isn't easy to do by just increasing M.