So now we have this big monetary policy package. When has money ever bought the way out from a recession in a large fixed exchange rate area without the help of fiscal policy?

I fail to remember. There might be cases, but I sure doubt euro countries will prove me wrong. Or, for that matter, this market-maker wrong (yesterday on Reuters’ blog):

Italian and Spanish 10-year bond yields could shed a further 20-25 basis points in coming weeks, strategists and traders said, but would struggle to stay below the 5 percent level that prevailed before they were sucked into the crisis last year. “To push yields through this crucial 5 percent level…we would need a fundamental improvement which for now, if we look at the growth side of the debt equation, still looks unlikely,” said Michael Leister, a rate strategist at DZ Bank. “All these negative factors the market has been more or less ignoring since the beginning of the year will begin to regain a more prominent role and this liquidity impact will gradually fade.”

Finally, somebody (which I highly trust for his pragmatism) in the markets is starting to side with us that we need expansionary fiscal policies, even if in a balanced budget matter.

Money can’t buy happiness, after all it is just little printed pieces of paper. But expansive fiscal policy can, it boosts jobs, cuts unemployment, prevents firms from closing down. How much time do we have to wait to come to that conclusion? Time is money, they say. I sometimes disagree with that, but in this case, oh yes.