OK, maybe I exaggerate a little. But he's at least halfway there.
One of the key points that Market Monetarists (Scott Sumner especially) keep making (and that keeps getting ignored) is that low (nominal and real) interest rates are not a sign that monetary policy is loose, but are a consequence of monetary policy being tight.
Here is Chris House, making the same point, and saying we have microfoundations on our side:
"Here is another example [of the benefits of microfoundations]. In the traditional IS/LM model, investment demand is assumed to depend negatively on the real interest rate. This assumption is important for the functioning of the model – it makes the IS curve slopes down. The assumption itself is based on a slight confusion between the demand for capital and the demand for investment. What would happen if we added some microfoundations? Suppose we removed the ad hoc investment demand curve and instead required that the marginal product of capital equal the real interest rate (the user-cost relationship). In this case, there would be a positive relationship between output and the real interest rate (the IS curve would slope up! Higher output would require more employment which would raise the marginal product of capital and raise the real interest rate.) An increase in the money supply would cause the real rate (and the nominal rate) to rise. How should we interpret this? One interpretation is that we need to think a bit more about the investment demand component of the model. An alternative reaction would be to say “I know that the original IS/LM model is right; I don’t need the microfoundations; they are just preventing me from getting the right answer.”
Who came up with this twisted version of the IS/LM model you might ask? Wait for it …
…yep … James Tobin. (1955, see Sargent’s 1987 Macroeconomic Theory text for a brief description of Tobin’s “Dynamic Aggregative Model.”)
Even today, when we analyze the New Keynesian model, it is often done without any investment (this is like having an IS/LM model without the “I”). Adding investment demand can sometimes result in odd behavior. In particular you often get inverted Fisher effects in which monetary expansions are associated with higher output but strangely, higher real interest rates and higher nominal interest rates. (If you teach New Keynesian models to graduate students I would encourage you to take a look at Tobin’s model.)" (my bolding)
What this means is that the so-called ZLB "liquidity trap" is merely an artefact of tight monetary policy.
But I am not happy with the idea that we "...instead required that the marginal product of capital equal the real interest rate (the user-cost relationship)." Because MPK = r+d only holds in a model where the relative prices of capital goods to consumption goods is always one, and where firms are always able to sell the extra output from employing an extra unit of capital.
In a two good model, with a curved PPF between capital goods and consumption goods, we will see a negative relationship between the real interest rate and the level of investment, as we move along that PPF. Because a lower real interest rate raises the relative price of capital goods to consumption goods, so profit-maximising firms will supply more capital goods and fewer consumption goods.
But the whole point of the ISLM model is to see what happens when an economy is inside the PPF. And if an economy is inside the PPF, because there is a recession, firms may not be able to sell the extra output from employing an extra unit of capital. Firms may be minimising costs of producing the level of output they can sell. And the capital/labour ratio firms will choose, to minimise costs, will depend on the wage/rental ratio.
What happens to investment in a recession depends on whether: wages are sticky, capital rentals are sticky, consumption goods prices are sticky, capital goods prices are sticky.
Here's Chris again: "The main thing New Keynesian research has been devoted to for the past 20 years is an exhaustive study of price rigidity. If anything was holding us back it was the extraordinary devotion of our energy and attention to the study of nominal rigidities. We now know more about the details of price setting than any other field in economics."
Hmmm. I wish we knew enough about nominal rigidities so we could properly understand the slope of the IS curve.