David Beckworth: St. Louis Fed President James Bullard just delivered a speech where he claims that U.S. monetary policy has been stellar over the past four years. In fact, he says monetary policy was “close to optimal.” Yes, I about chocked too after reading that line. His view is that (1) the Fed kept the price level on its long run trend and that (2) there was a reduction in U.S. potential output that undermines that case for looking at NGDP being below trend. Consequently, there is nothing to the claims of insufficient aggregate demand. It is all structural, end of the story. This is not the first time Bullard has made claim (2), but it is the first time he has combined it with the claim that the Fed has been doing a fine job since 2008. Scott Sumner has already responded and I am sure others will too. My response to Bullard is that your theory cannot explain an important development that have been ongoing since 2008: the elevated demand for liquidity. If we are simply on a new growth path and the Fed has done a fine job with monetary conditions, then why is the demand for safe assets still so pronounced?