FT columnist and economist Martin Wolf astutely observes that in the rush to evaluate whether the U.S. Federal Reserve’s monetary policy easing and the U.S. Congress’ $150 billion stimulus plan will work, we need to decide what ‘will work’ means.

Using the Fed’s definition, Wolf says, the monetary/fiscal policy will have been judged a success if policymakers have eliminated any risk of a collapse into a Japanese-style deflation. (In the late 1980s, Japan fell into a decade-long deflation period after the collapse of a real estate boom and related asset prices.) Conversely, Wolf notes, Congressional officials, particularly those up for re-election, may not view the stimulus policy as a success unless the U.S. economy is growing at a healthy rate, at/above 3% GDP growth.

‘Will work’ bar too low?

The above, of course, leads to the natural question of “Is the ‘will work’ bar too low?” Economist David H. Wang says no.