George Soros endorses a 5% NGDP target

Remember back in 2008, when one almost never saw the term “nominal GDP” in the blogosphere?

Here George Soros:

The same result could be achieved, with less cost to Germany, if Germany chose to behave as a benevolent hegemon. That would mean implementing the proposed European banking union; establishing a more or less level playing field between debtor and creditor countries by establishing a Debt Reduction Fund, and eventually converting all debt into Eurobonds; and aiming at nominal GDP growth of up to 5%, so that Europe could grow its way out of excessive indebtedness.

HT:  Libertaer and Cthorm


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29 Responses to “George Soros endorses a 5% NGDP target”

  1. Gravatar of bill woolsey bill woolsey
    11. September 2012 at 11:11

    Growth path or growth rate?

  2. Gravatar of Major_Freedom Major_Freedom
    11. September 2012 at 11:15

    Haha, Soros doesn’t know that the growth in NGDP is caused by an increase in the quantity of money that in large part takes the form of credit expansion (debt) from the banking system.

    “We can solve the debt problem by…more debt.”

  3. Gravatar of woupiestek woupiestek
    11. September 2012 at 11:19

    Are the banking union and the Eurobonds really necessary?

  4. Gravatar of RPLong RPLong
    11. September 2012 at 12:06

    You’re now on the same side as George Soros.

    Um… congratulations?

  5. Gravatar of Morgan Warstler Morgan Warstler
    11. September 2012 at 13:10

    Benevolent Hegemon!

    HA!

    Only when the losers ADMIT and REPENT, this means:

    1. firing public employees until….

    2. you have tacitly admitted private sector workers are higher status humans

    3. and then, live on your tax receipts.

    Deliver unto the the hegemon 1, 2, 3… and he shall be benevolent.

    Debt can ALWAYS be forgiven, this is about ordering your cultural and social institutions so that the private sector business owners are FIRMLY in the drivers seat.

  6. Gravatar of Bill Ellis Bill Ellis
    11. September 2012 at 13:53

    Morgan… The Benevolent Hegemon’s messianic spokesmen.

    All hail the Benevolent Hegemon !

  7. Gravatar of RebelEconomist RebelEconomist
    11. September 2012 at 13:59

    Of course he does – George Soros is a sophisticated investor with only a small proportion of his wealth in nominal claims. He is also in favour of spending Germans’ money to bail out the eurozone periphery, rather than his own. Tell us when a modest investor with a large fraction of their wealth in bank deposits endorses a 5% NGDP target.

    Come to think of it, I bet you did not dare to advocate a 5% NGDP target for the US on your recent travels in China, Scott.

  8. Gravatar of Matt Waters Matt Waters
    11. September 2012 at 14:15

    “Tell us when a modest investor with a large fraction of their wealth in bank deposits endorses a 5% NGDP target.”

    I am a modest investor with just about all my wealth in bank deposits. I endorse a 5% NGDP target.

  9. Gravatar of Justin Irving Justin Irving
    11. September 2012 at 14:51

    Hats off Scott. You’re slowly changing the consensus.

  10. Gravatar of ssumner ssumner
    11. September 2012 at 14:53

    Matt’s right, current monetary policy is producing negative real returns for small savers.

  11. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    11. September 2012 at 15:04

    Since this is a thread about a monomaniac;

    http://delong.typepad.com/sdj/2012/09/in-which-paul-ryan-runs-for-the-exit.html

    ‘If the ads touting him for Vice President aren’t enough to win him House reelection, how can this possibly help?

    ‘This is doubt, fear, and panic overwhelming rationality…’

    Well, the precedent was set with ‘Lyndon’s Law’ in 1960 when LBJ was allowed to run for both VP and re-election to his Senate seat. Which Lloyd Bentsen used to his advantage to run unsuccessfully for Veep alongside Dukakis in 1988, but get re-elected to the Senate at the same time.

    Guess who was named Clinton’s Treasury Sec’y in 1993, under whom Brad served.

  12. Gravatar of John John
    11. September 2012 at 16:28

    The world has become about transferring wealth from the responsible to the irresponsible. Does anyone think this is gonna end well?

  13. Gravatar of Morgan Warstler Morgan Warstler
    11. September 2012 at 16:56

    John, if you do it with no make-up and keep the LT low enough, it ends really well.

    That’s why my bet with Scott is such a big deal.

    The BEST conservative scenario is deficit spend, force Dems to on cut when President or lose.

    The 2nd best scenario, is get rid of highs and lows to keep weird socialists from winning office.

    Whether fiscal conservatives should put politics in front or behind economics is a critical choice, until we know how 1980 -till 2012 plays out, that choice is debatable.

  14. Gravatar of Benjamin Cole Benjamin Cole
    11. September 2012 at 22:14

    The Soros piece was interesting, and I do think many European nations would be better off out of the Euro, and printing their own money again.

    The powers of the sovereign include courts and police and rule of law, protection of borders, public health and power of the money press.

    You are not a “nation” if someone else controls your money supply. You cannot guarantee national debts.

    The next step is to make monetary policy transparent, intelligible, and controlled by democratically elected individuals.

    Surely good government is transparent and accountable. The opaque, mysterious, mumbling Fed and ECB, and Bank of Japan, cannot pass the democracy test.

    No public entity likes being transparent and accountable. Everyone has a reason where their pet public agency should somehow be exempt, in order to make good policy.

    I don’t buy it, and especially not now. We have elected officials control fiscal policy, regulatory policy, any number of policies that impact the economy (let alone our horrific national defense arsenal). These elected officials often do a bad job.

    That’s democracy–the worst system, until you try any other system.

  15. Gravatar of Mark C Mark C
    11. September 2012 at 22:32

    Sadly, the fight is far from over, according to Bloomberg’s latest survey on economists:

    4) Generally speaking, is the current stance of U.S. monetary
    policy too tight or too easy, given the overall outlook for
    the economy?
    a. Much too tight.
    b. Somewhat too tight.
    c. Just right.
    d. Somewhat too easy.
    e. Much too easy.

    ========================================================
    Response Count: 66 100%
    ——————————————————–
    a 1 2%
    b 12 18%
    c 21 32%
    d 21 32%
    e 11 17%
    ========================================================

  16. Gravatar of RebelEconomist RebelEconomist
    11. September 2012 at 23:53

    “Matt’s right, current monetary policy is producing negative real returns for small savers.”

    So, let’s tighten monetary policy then, now. As I have written here many times before, in my view the economic establishment has learned entirely the wrong lesson from Japan’s experience, which should be that trying to deny and reinflate an asset bust leads to long term stagnation as investors hold back for fear that the bust will unfold anyway (as it continues to do years later in Japan, viz Olympus and AIJ).

    Scott is pushing at an open door in countries like the US and the UK, where there are more people who are short nominal claims (above all, mortgages), with these countries’ basic balance deficits (ie current account plus long term investment abroad). That is why the opinion of the likes of China, Japan etc should matter to the advocates of NGDP targeting – if those countries support 5% NGDP targeting starting from a level above present NGDP in the US, it suggests that even they believe that their chances of getting repaid in real terms are higher with robust NGDP growth (that makes default less likely) than with a strong dollar (that preserves the value of what dollars they do get back).

    From the frequent trumpeting of every expression of support for NGDP targeting on this blog though (not to mention his glib rather than scientific responses to doubters), I suspect that Scott just wants to win the argument anyhow.

  17. Gravatar of Doc Merlin Doc Merlin
    12. September 2012 at 00:00

    Awesome, Garret Jones agrees with me that the stickiness is coming from debt contracts.

    http://econlog.econlib.org/archives/2012/09/debt_the_sticki.html

    In other news, its looking more and more like this whole thing was a supply side shock rather than a nominal shock. A nominal shock would have adjusted to the new nominal path in 4 years.

  18. Gravatar of Kevin Donoghue Kevin Donoghue
    12. September 2012 at 01:12

    RebelEconomist: “So, let’s tighten monetary policy then, now.”

    Andrew Mellon lives!

  19. Gravatar of Ben J Ben J
    12. September 2012 at 02:16

    RebelEconomist: “Purge the rottenness!”

    No thanks.

  20. Gravatar of Saturos Saturos
    12. September 2012 at 02:53

    The Euro appreciated on the news of the birth of the ESM:

    http://www.ft.com/cms/s/0/37380d24-fcbb-11e1-ba37-00144feabdc0.html

    Does this mean that it’s bad news?

  21. Gravatar of RebelEconomist RebelEconomist
    12. September 2012 at 03:09

    Not liquidation, Kevin, but, to coin a phrase, “reckoning”. I am no expert on the depression, but I believe that Mellon was calling for liquidation even of performing assets, which was gratuitously damaging especially when the lifetime of mortgages then was quite short.

    What I have in mind is, with assets priced to reflect a commitment to monetary policy that maintains the value of the currency (which probably would be not much different from present policy), a realistic accounting of balance sheets. Then, although the shareholders of enterprises thereby revealed to be insolvent would be written down to zero, and perhaps some creditors might suffer haircuts according to seniority, only those enterprises that could not be sold as going concerns would be liquidated. In short, impose the rules that have been established from the experience of years of experience of capitalism, and which entrepeneurs would have expected to be applied ex ante. If necessary, spend public money to expand the accounting and legal capacity to expedite the process, and on transfer payments and loans to mitigate the impact on the losers.

    Perhaps the lasting tragedy of Mellon is that he gave the fainthearted an excuse to forestall facing up to their real problems, and the peddlers of inflationary fixes like MMT and 5% NGDP targeting a bogeyman with which to scare the doubters.

  22. Gravatar of Browsing Catharsis – 09.12.12 « Increasing Marginal Utility Browsing Catharsis – 09.12.12 « Increasing Marginal Utility
    12. September 2012 at 04:06

    [...] George Soros endorses NGDP targeting. [...]

  23. Gravatar of Michael Michael
    12. September 2012 at 05:21

    More on how current monetary policy has hurt savers – and how it has not!

    http://macromarketmusings.blogspot.com/2012/09/is-fed-really-causing-sustained-drop-in.html

    “Many observers claim the Fed, through its large scale asset purchases (LSAPs) and its forward interest rate guidance, has pushed down interest rates and compressed the yield curve spread. Consequently, savers, investors, and financial intermediaries who need positive interest spreads have been harmed. It’s all the Fed’s fault they say. As I have pointed out before, this story falls apart because it ignores the fact that the term structure of the natural interest rate–the interest rate driven by the fundamentals of the economy–is being compressed too. That is, given the weakened state of the economy the demand for credit is down, desired savings is up, and interest rates are falling as a result. “

  24. Gravatar of Major_Freedom Major_Freedom
    12. September 2012 at 05:39

    Michael:

    As I have pointed out before, this story falls apart because it ignores the fact that the term structure of the natural interest rate–the interest rate driven by the fundamentals of the economy–is being compressed too. That is, given the weakened state of the economy the demand for credit is down, desired savings is up, and interest rates are falling as a result.

    This is a false theory of interest rates.

  25. Gravatar of Phil Phil
    12. September 2012 at 07:08

    I find it very depressing how many economists do not understand monetary policy. At all.

  26. Gravatar of ssumner ssumner
    12. September 2012 at 16:24

    Mark C. Is there a link?

    Saturos, The equity markets will usually tell us whether it’s good news or not.

  27. Gravatar of Mark C Mark C
    13. September 2012 at 01:40

    Scott,

    Think it’s only accessible through a Bloomberg Terminal, here’s the survey:

    Sept. 12 (Bloomberg) — Economists surveyed by Bloomberg News find it more likely that the Federal Reserve will announce a third round of large-scale asset purchases, or QE3, than previously thought. In a Bloomberg News survey before the Sept. 12-13 meeting of the Federal Open Market Committee, economists see an 88 percent chance of QE3 being introduced, versus a 76 percent chance in a survey conducted on July 31. Following are the results of the most recent survey, conducted Sept. 7 to Sept. 10:
    1) Is the Fed likely to announce a third round of large-scale
    asset purchases, or QE3?
    a. Yes, at the Sept. 12-13 meeting.
    b. Yes, at the Oct. 23-24 meeting.
    c. Yes, at the Dec. 11-12 meeting.
    d. Yes, in 2013 or later.
    e. No, the Fed probably won’t undertake this strategy.

    ========================================================
    Response Count: 73 100%
    ——————————————————–
    a 47 64%
    b 3 4%
    c 9 12%
    d 5 7%
    e 9 12%
    ========================================================

    2) During the second round of quantitative easing (QE2), the
    Fed purchased a fixed amount of securities totalling $600
    billion over an eight month period. Several of the Fed’s
    regional bank presidents have said that QE3 should be
    “open-ended” instead, with a monthly pace of purchases.
    If the Fed starts QE3, what form would it take?
    a. Fixed amount of purchases, with total purchases of
    Treasury securities $______ billion
    Mortgage-backed securities $______ billion

    b. An open-ended program of monthly purchases of
    Treasury securities $______ billion
    Mortgage-backed securities $______ billion

    ========================================================
    A. Treasury A. Mortgage
    ——————————————————–
    Number of responses 18 19
    Median $300 $400
    Average $300 $382
    ========================================================
    B. Treasury B. Mortgage
    ——————————————————–
    Number of responses 27 31
    Median $30 $35
    Average $35 $39
    ========================================================

    3) In January, the Fed said the economic conditions will likely
    warrant holding the Fed funds rate near zero through at least
    2014. Will the Fed extend this date into 2015?
    a. Yes, at the Sept. 12-13 meeting.
    b. Yes, at the Oct. 23-24 meeting.
    c. Yes, at the Dec. 11-12 meeting.
    d. Yes, in 2013 or later.
    e. No, the Fed probably won’t undertake this strategy.
    f. No, the Fed will make the low-rate policy conditional
    on economic performance.

    ========================================================
    Response Count: 73 100%
    ——————————————————–
    a 50 68%
    b 1 1%
    c 2 3%
    d 3 4%
    e 6 8%
    f 11 15%
    ========================================================

    4) Generally speaking, is the current stance of U.S. monetary
    policy too tight or too easy, given the overall outlook for
    the economy?
    a. Much too tight.
    b. Somewhat too tight.
    c. Just right.
    d. Somewhat too easy.
    e. Much too easy.

    ========================================================
    Response Count: 66 100%
    ——————————————————–
    a 1 2%
    b 12 18%
    c 21 32%
    d 21 32%
    e 11 17%
    ========================================================

    5) If President Barack Obama is reelected, do you expect
    Bernanke to be reappointed as Fed Chairman once his term
    ends in January 2014?
    a. Yes.
    b. No.
    c. I don’t know.

    ========================================================
    Response Count: 67 100%
    ——————————————————–
    a 45 67%
    b 16 24%
    c 6 9%
    ========================================================

    ================================================================================
    Individual responses: 1 2aTRE 2aMOR 2bTRE 2bMOR 3 4 5
    ================================================================================
    F. Panelli, Banca Aletti b a d a
    J. Dunham, Guerrilla Econ a e e a
    H. Johnson, Hugh Johnson Adv a $20 $20 a c a
    C. Rominger, DZ Bank c $300 $100 c b a
    T. Cooper, Business Monitor a $100 $500 a b a
    R. Dye, Comerica a $300 $200 f d a
    B. Krampen, Nord LB a f c c
    J. Naroff, Naroff Economics e $50 f c b
    S. Blitz, ITG e a c b
    L. Noto, Anima sgr e $500 b c b
    S. Ricchiuto, Mizuho Sec. a $400 a d a
    A. Shenfeld, CIBC World Mkts c $70 a b a
    D. North, Euler Hermes a $40 $40 a e a
    J. Smith, Parsec Financial e $1 f d a
    J. Canally, LPL Financial a a b b
    J. Lederer, Cantor Fitzgerald a $50 $50 a d c
    J. Hatzius, Goldman Sachs a $50 a
    D. Swonk, Mesirow Financial a $200 $500 a b b
    ================================================================================
    Individual responses: 1 2aTRE 2aMOR 2bTRE 2bMOR 3 4 5
    ================================================================================
    R. Dhawan, Georgia State d $80 c c a
    G. LeBas, Janney Mont Scott c a
    N. Karp, BBVA c $200 $800 a d a
    D. Holt, Scotiabank a $40 $60 a b a
    M. Melnik, S. Polytechnic U a $70 $20 f d a
    J. Herzog, Oxford Economics b $400 $400 a c c
    M. Englund, Action Economics a $300 $100 e e a
    C. Moutray, Natl Assoc Manuf a $500 f d c
    J. Silvia, Wells Fargo & Co. a $30 $20 a d a
    W. Hummer, Wayne Hummer Inv a $750 $200 a c a
    R. DiClemente, Citigroup a a
    D. Saporta, Credit Suisse a a b
    H. Shimazu, SMBC Nikko Sec. c $30 $50 a d b
    Schlossberg, Wells Cap Mngt. a $300 $300 a c b
    R. Koepke, Inst Intl Finance a $150 $150 d d a
    C. Dismuke, Vining Sparks a $5 $50 a d a
    M. Regalia, US Chamber Comm a $40 $40 d c a
    P. Brewbaker, TZ Economics e e c a
    ================================================================================
    Individual responses: 1 2aTRE 2aMOR 2bTRE 2bMOR 3 4 5
    ================================================================================
    T. Lam, OSK Group/DMG c $100 a d b
    A. Amemiya, Nomura b $15 $35 a d c
    R. Stein, First Trust Adv. a a e b
    F. Genereux, Desjardins c a c a
    P. de Bruin, ABN Amro a a
    J. Schenker, Prestige Econ. d a c a
    D. Maki, Barclays a $25 $25 a c b
    J. Stiles, IDEAglobal e f e a
    Brusca, Fact & Opinion Econ e $25 $100 e e b
    Baumohl, Econ Outlook Group a f c a
    S. Brown, Raymond James a $100 $400 a b a
    J. Praveen, Prudential a $25 $25 a c a
    D. Duncan, Fannie Mae a $600 a d a
    Rupkey, BankTokyo-Mitsubishi a $600 $500 a d a
    P. Franke, Helaba c $50 $50 a d a
    A. Douglas, Heartland Fin. a $30 $20 a c a
    Fullerton, U. Texas El Paso a $30 $30 f d a
    K. Cummins, UBS a $500 a d a
    ================================================================================
    Individual responses: 1 2aTRE 2aMOR 2bTRE 2bMOR 3 4 5
    ================================================================================
    Lonski, Moodys Capital Mkt. a $50 $25 d c a
    M. Carey, Credit Agric. CIB a $25 $25 a b c
    S. Incremona, 4Cast a $50 $25 a d a
    P. Jain, MacroFin Analytics d $30 $30 a d b
    Schieven, DundeeWealth Econ a $37 $37 a b a
    D. Crowe, NAHB a $300 $300 a b a
    J. Coronado, BNP Paribas a $300 $300 a b b
    W. Dunkelberg, NFIB e $500 f e a
    S. Stanley, Pierpont Secur. e $45 $30 a e b
    J. LaVorgna, Deutsche Bank a $25 $25 a c a
    Schomer, Pinebridge Invest d $35 a e a
    DuBravac, Consumer Electr. a e c a
    M. Balmaseda, Cemex a $200 $400 a b a
    K. Mayland, ClearView Econ. a $40 $10 f e a
    M. Zandi, Moody’s Analytics c $25 $50 a c a
    B. Kasman, JPMorgan Chase a a
    B. Jones, Societe Generale a a
    J. Paulsen, Wells Cap Mngt a e e a
    ================================================================================
    Individual responses: 1 2aTRE 2aMOR 2bTRE 2bMOR 3 4 5
    ================================================================================
    B. Horrigan, Loomis, Sayles d $20 $20 a a b
    ================================================================================

  28. Gravatar of TallDave TallDave
    13. September 2012 at 09:54

    Dear God in heaven, I agree with George Soros.

    My world no longer makes sense.

  29. Gravatar of TheMoneyIllusion » The Bernanke press conference TheMoneyIllusion » The Bernanke press conference
    13. September 2012 at 13:54

    [...] well-intentioned, etc.  I think this press conference shows that my comments were justified.  A commenter named Mark C recently sent me a survey by Bloomberg that showed that the vast majority of economists did not [...]

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