Monetarism vs. Fiscalism Redux

      After writing my last piece, I read a little more from Lars and in his post "Monetary Policy Can't Solve All Problems" he elaborates a little on this.

     http://diaryofarepublicanhater.blogspot.com/2011/12/monetarism-vs-fiscalism.html

       When he says: "The professor has now introduced the AD-AS model (and the dynamic AD-AS model). Since AD is just (1)’ the professor has not started to talk about fiscal policy (what multiplier??). In his head the AD curve can be shifted by shocks to M or V, but that has nothing to do with fiscal policy. In “his” AD-AS model fiscal policy does really not exist, as it is basically a micro phenomenon – fiscal policy might have an impact on relative prices, but it has no impact on the PY aggregate and fiscal policy might impact the supply side of the economy, but not the AD-curve? No, of course not."

        http://marketmonetarist.com/

       This sounds sort of like monetary policy can solve all problems.  But in his monetary can't solve all problems he does clarify that:

       "You say that when you have a hammer everything looks like a nail. Reading the Market Monetarist blogs including my own one could easing come to the conclusion that we are the “hammer boys” that scream at any problem out there “NGDP targeting will fix it!” However, nothing can be further from the truth."

       According to Lars, monetary policy is not even a stimulus in the Keynesian sense.

       "Unlike Keynesians Market Monetarists do think that monetary policy should be used to “solve” some problems with “market failure”. Rather we believe that monetary policy should avoid creating problems on it own. That is why we want central banks to follow a clearly defined policy rule and as we think recessions as well as bad inflation/deflation (primarily) are results of misguided monetary policies rather than of market failures we don’t think of monetary policy as a hammer."

     So monetary policy is meant to take out any disequilbrium caused by monetary policy. I appreciate that he admits that monetary policy doesn't cause all problems, but still think he may ascribe too much power to it. To claim at he does in the title of another piece, "Scott is Right: Recessions are always and Everywhere a Monetary Phenomenon" certainly seems to me to be taking it too far. What this all seems to mean to me is that the Market Monetarists are libertarians who subscribe to Laissez-Faire.

    It seems to others-whether pro-interventionist Keynesians or anti-interventionist conservatives-that monetarists advocate government intervention themselves. However it seems that their premise is that monetary policy is meant to take out disequilibriums caused by monetary policy's own sins. In principle they would prefer Laissez-Faire-according to Sumner the 20s were a golden age that  only the Fed's mishandling of monetary policy caused it to end in Depression. Sumner has gone as far as claiming that if Benjamin Strong hadn't died there would have been no Depression-a premise just a little too facile.

  Essentially the original sin was the rise of the modern Fed-prior to that presumably monetary policy worked "automatically" which is the way the market is supposed to work according to libertarian theory. If recessions were always a monetary phenomenon that would mean that with the right monetary policy-NGDP-we'd never have a recession.

  Sounds like the Garden of Eden before the fall.