zero lower bound / liquidity trap & the monetary base

ZLB Denial by Krugman

Yes — if back in 2007 you denied the existence of liquidity traps, that is, denied that the zero lower bound on short-term interest rates places limits on monetary policy, you should long since have acknowledged that you were very, very wrong: 

Since late 2007 the monetary base has risen more than 300 percent, while GDP and consumer prices have risen less than 20 percent. And no, the disconnect is not all due to the 0.25 percent interest rate the Fed pays on reserves.

You can argue that the Fed could have done more — it could have expanded its balance sheet even further, and/or moved into riskier assets, and/or done more to change expectations. But I don’t see how you can deny that making monetary policy effective has been far harder since we hit the ZLB than it was before, and that this retroactively casts great doubt on Friedman’s claims that the Fed could easily have prevented the Great Depression.