Meltzer: monetary policy is not the problem

Allan Meltzer has always been one of my favorite economists, perhaps because we think alike on so many issues. His op-ed in today's WSJ ("What's Wrong With the Federal Reserve") is a good example of his clear-thinking approach to complex issues:

Consider the response to last week's employment report for June—a meager 80,000 net new jobs created, and an unemployment rate stuck at 8.2%. Day traders and speculators immediately clamored for additional monetary easing. Even the president of the Federal Reserve Bank of Chicago joined in.
To his credit, Mr. Bernanke did not immediately agree. 

But he failed utterly to state the obvious: The country's sluggish growth and stubbornly high unemployment rate was not caused by, nor could it be cured by, monetary policy. Market interest rates on all maturities of government bonds are the lowest since the founding of the republic. Banks have $1.5 trillion in cash on their balance sheet in excess of their legally required reserves—far more than enough to meet any unsatisfied demand for loans that bankers regard as prudent. 

For those that missed it, this echoes my thoughts in a post last week.