The distinction between Keynesians and Monetarists makes no sense anymore

This paper argues that the distinction between Keynesianism and Monetarism is not a useful frame for the debate on monetary policy during the past decade. The main driver of this debate is the secular decline in the real interest rates over the past four decades. It is more useful to distinguish between those who hold that this decline is due to shifts in supply and demand of capital (referred to as Neoclassicals) and those who hold central banks responsible (referred to as Neo-Austrians). Both views have widely different policy implications, both for the past decade of QE as well as for central banks’ subsequent response to the outburst of inflation since the fall of 2021. The confusion in the public is partly due to the disciplines adherence in its teaching programs to the quantity theory of money. This theory is inconsistent with today’s payment system that is no longer based on bank notes but on credits on cash-accounts