-
Farewell to the Spectator
December 16, 2011 | 8 comments
-
Tentative Praise for Ryan’s New Bipartisan Medicare Plan
December 15, 2011 | 3 comments
-
The Day Ahead: Thursday, December 15
December 15, 2011 | 0 comments
-
Examiner for Romney, National Review Against Gingrich
December 14, 2011 | 39 comments
-
Paul Ryan to Introduce New Medicare Plan with Democrat Ron Wyden
December 14, 2011 | 4 comments
The Spectacle Blog
According to the Financial Times, the Federal Reserve is considering, among other things, changing its strategy from focusing on an implicit inflation target to targeting a nominal gross domestic product (NGDP) level.
In other words, instead of doing one-off programs like QE2 and Operation Twist to try to steer things in the direction of 2 percent inflation, the Fed announce that it would manipulate its balance sheet in whatever way it needed to to put the country on a path to hit a certain level of current spending.
What makes it so remarkable that the Fed is even considering this change is that the idea more or less originated in the blogosphere, thanks to the work of one blogging economist, Scott Sumner of Bentley College, who maintains The Money Illusion. The Wall Street Journal’s Kelly Evans has a good backgrounder on NGDP targeting, including great links.
The best explainer of the pros and cons of NGDP targeting, however, was written by Sumner himself, and appeared in the fall issue of the great National Affairs.
Updated to fix misleading headline.
View all comments (5) | Leave a comment
More Blog Posts by Joseph Lawler
http://spectator.org/blog/2011/10/27/fed-considering-changing-its-m
Follow us:
ADVERTISEMENT
Current Issue
- The Mole in Don Draper
- Gabby Giffords Poisons the Well
- Way Beyond the Lemonade Stand
SPONSORED LINKS
FLASHBACK TO: 1995
-
Pope Culture
A man of faith in a godless age is hitting Americans where it hurts.
-
Why the GOP Does Not, Like, Totally Suck
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
-
Dames at Sea
-
In the Absence of Guns
In Britain, defending your property can get you life.
-
The Metaphysical Martini
-
Counting the Costs of Clintonism
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
-
Chuck McHagel
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
-
The Legacy of Old John and Mother Fresh-Roasted
-
It’s the Best Time of the Year
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
-
The Bush Crack-Up
Was the President done in by the economy, or by the politics of the economy?
Clip of the Day
ADVERTISEMENT
Dixie Pixie| 10.27.11 @ 5:39PM
Sounds like the Fed is going for Full Power Keynesian Economic Policy.
Specifiably, let inflation rise as high as necessary to keep the “Aggregate Demand” high, thus a Fed set NDGP target as stimulated public spending making up for the lack of private sector spending .
Look for the Great Depression to get a lot worse.
Dixie Pixie| 10.27.11 @ 8:53PM
OK, My above post is one of the most confusing as I have ever written.
So I am going to make another shot at it.
It is a matter of faith in Keynesian economics there is a mathematical relationship between the inflation rate and the level of economic activity as measured by the NGDP and the level of employment.
So to increase economic activity it is simply a matter of increasing inflation so businesses activity will increase to take advantage of the increased profits of increasing prices.
It is also a Keynesian article of faith that an increase in inflation forces out the hidden wealth in monetary assets by making money more worthless as a function of time thus increasing business activity as those hidden assets are converted to goods, services, stocks and bonds.
Thus by changing the Federal Reserve target from maintaining a constant inflation rate to maintaining a constant NGDP level the inflation rate will rise thus stimulating business activity to match the NGDP level.
This is Keynesian Magical Thinking on steroids.
Business activity did not decline to a mythical out-of-balance relationship between the inflation rate , aggregate demand, business confidence and the money supply.
Business activity dropped simply because the Socialists drove the weaker businesses into the ground and into extinction.
You can see this on “Main Street” where once thriving businesses have folded up and are gone.
One strip mall I passed had 50% of all shops boarded up.
As the classic Monty Python Parrot Sketch showed one can not get any activity out of a dead Norwegian Blue even if you put 40,000 volts through it.
So it is with dead businesses even if you put 40,000 volts of Keynesian Stimulus through it.
Dead is Dead period.
The change in Fed methodology will simply produce the “Stagflation” of the 1970's and 1930's by increasing Inflation and while doing nothing about the Socialists suppressing businesses will produce the Stagnation effect.
The current Great Depression is about to get a lot nastier with Stagflation on the way.
Monty Python Parrot Sketch::::
http://www.youtube.com/watch?v=CIrBMt4eiRk
Clint| 10.27.11 @ 7:42PM
Beyond focusing on a GDP adjusted for inflation, we should address the folllowing.
http://www.youtube.com/watch?v=vxIM2y1f5Nw
The Tea Party Rebellion Is Here.
axbucxdu| 10.27.11 @ 10:03PM
The Fed should be considering where on the lawn it will place the For Sale sign.
Red Phillips | 10.28.11 @ 9:14AM
Instead of worrying about the strategy of the Fed, conservatives should be attempting to shut it down. The Fed is blatantly unconstitutional and an obnoxiously bad way to handle the money supply to begin with as all this QE2, Operation Twist and NGDP chicanery illustrates.