Actions running forwards and those going backwards collide in the here and now. As you might imagine, that brings a great deal of confusion into the protagonists’ plans. However, from an economist’s point of view, there is already enough potential for trouble even with time ﬂowing in only one direction.
In both monetary and ﬁscal policy, there are incentives for policymakers to announce a certain course of action today and deviate from it tomorrow. For example, the government could announce to seek price stability, but then trade it off for lower unemployment in the short run by creating surprise inﬂation. Of course, people might be fooled once or twice, but not all the time.