http://gregmankiw.blogspot.com/2012/01/liquidity-trap-may-soon-be-over.html
In this recent posting, the always insightful Mankiw points out that US fundamentals are now recovering to the point where normal monetary policy can be restored. Absent a major setback (like a Eurozone disaster), the US economy will recover from being on the brink to merely being anaemic and fragile. Given the scale of our recent travails -that is a comforting thought. This chart seems to spell the end of Quantitative Easing and other various extraordinary measures. Once the fundamentals recover to a normal but low level of activity, the Fed will want to return to its usual interest rate tweaking to manage the economy and keep inflation down.
This is a testament to the success of Quantitative Easing as a policy. Though it will take decades for the Fed to completely reverse its extraordinary interventions in the money markets, those actions have worked and seen the US through a would-be depression. Though they will be cautious about rising interest rates too soon, doubtless the Fed will be relieved to be back in this more familiar territory.
Meanwhile in Europe, noone is in charge.
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