Tyler Cowen is baffled and claims nobody understands when in fact his political opponents do understand

Monetary policy is a really big deal by Scott Sumner

Tyler Cowen is surprised by the size of the various emerging market reactions to the non-taper:

Pay special heed to quantitative magnitudes. For how long are we delaying the taper? One or two months? How much is the taper anyway, relative to the stock of relevant financial assets? Taking $10 to $15 billion off of $85 billion a month in purchases, when the asset stocks are in the trillions? Woo hoo.
. . .
I’ll say it again: none of you understand what is going on here, and neither do I. I am not seeing enough admission of this basic fact.

I certainly admit to not understanding the specific market reactions that he points to, but don’t really agree with the larger point he is making.

Monetary policy drives NGDP; nothing else really matters. But people care about real variables, not nominal variables. So how important is NGDP anyway? It turns out that in the short and medium term it’s really, really important, even in real terms. In the long run not so much.
...
The markets went into Wednesday thinking the Fed was determined to taper for Larry Summers-type reasons. Fear of a big balance sheet. At the end of the day the markets realized that the Fed was serious about letting the data drive policy. That’s not just a different policy; it’s a completely different policy regime. And it will have important implications for when and under what conditions the Fed will start raising rates.


So yes, most of us can’t explain why the rupee did this or that on a given day. But who ever claimed they could? On the other hand the US stock market reaction makes perfect sense.