"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Saturday, June 20, 2015

Duda and Market-guided NGDPLT

Kenneth Duda's comment at Jason Smith's blog.

Jason, my name is Ken Duda. I'm a computer programmer who supports Sumner's program at Mercatus.

I am not going to defend Sumner's specific analysis. However I would ask you to think carefully about whether it's possible for a central bank to increase economic activity when there's rising unemployment, falling NGDP (or at least falling NGDP growth), low inflation, and the short-term risk-free nominal interest rate is zero. Krugman, Delong, and Wren-Lewis basically say no, or probably not, maybe the central bank should try, but there's not much it can do. I think they're wrong and the market monetarists are right. The idea that the monopoly issuer of a fiat currency can't induce more nominal spending seems nuts. Sure, the interest rate channel may be dead, but what about the expectations channel? If the central bank tells the market that it will hit its NGDP target come hell or high water, it's just a matter of time, and by the way, the target is rising constantly at say 5% a year, and all this money we're creating will absolutely not be sucked right back out of the economy until NGDP hits that target (or, more precisely, until a prediction market tells us that we'll overshoot our target if we fail to suck the money back out of the economy), then people expect more spending in the future, and that expectation of future spending stimulates spending today, either investment spending to build in anticipation of the future spending, or simply "getting while the getting is good", i.e., buying before prices rise significantly (inflation). 

Again, I am not here to defend Sumner and Sadowski's analysis in this case. However, it breaks my heart to see good intelligent people arguing about style or argument types etc when we just went through 8 years of 10 million people needlessly unemployed, lives shattered, savings lost, when the whole thing could have been averted with better monetary policy. Why can't you, me, Scott, Paul, Simon, Brad all get together, set aside the debate over fiscal stimulus, and demand better monetary policy? Market-guided NGDPLT seems like such a dramatic improvement over high-priest-guided inflation targeting, let's make it happen.


Kenneth Duda
Menlo Park, CA

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