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Today is March 19, 2013, and my guest is Scott Sumner of Bentley University, and blogger

at the Money Illusion, Scott, welcome back to Econ Talk.

Thanks for inviting me.

Scott, I know you're working on a book on the basics of monetary policy, and I wanted

to tap into that as well as discuss some recent posts that you blog the Money Illusion.

So we're going to talk about the basics, and ideally we'll get toward the end and to

the interaction between monetary and fiscal policy and why you're so skeptical of some

of the claims of Keynesian supporters in discussing the stimulus.

So I want to start with some very basics though.

You recently wrote that it's hard to argue that the business cycle is caused by real shocks,

and you gave some historical examples.

Why is it hard to argue that real shocks cause recessions and unemployment?

Well, first of all, I should say that I'm talking about countries with large,

diversified economies, like the United States.

...