By J.D. Alt
Christine Lagarde, managing director of the International Monetary Fund, was recently quoted in the Washing Post as having said something quite remarkable given the IMF’s historical position on monetary policy: “…we have to repeat over and over that monetary policy cannot be the only game in town, and that there has to be a combination of sound fiscal policies, use of fiscal space for those countries that have fiscal space in order to support growth and rejuvenate that growth.” The problem is, what do these words and phrases mean to most people who read them—including most U.S. politicians and economic pundits? What do they really mean, for that matter, in Lagarde’s own mind? Our collective thinking—and hence our actions—seem entrapped by “code” words which we assume everyone understands to mean some specific thing even though we’re not entirely clear what they mean ourselves. The result is massive confusion, hesitation, and inaction at a time when bold and effective steps are desperately needed.