Does this mean I get blamed when the hyperinflation arrives?

Seriously, I’m flattered by all the press coverage, but I’ve succeeded in going from being underrated to overrated.  Still, I’m very appreciative of the coverage in The Atlantic and BusinessInsider.

I’d like to point out that this has been a group effort by all of the market monetarists.  Woodford, Krugman, and Jan Hatzius of Goldman Sachs all mentioned David Beckworth.  I’m not trying to engage in false modesty, I presume some of my posts were fairly persuasive, or maybe I’m just a louder voice.  But I lack the technical skills of people like Beckworth and Josh Hendrickson.  Nick Rowe knows much more theory than I do, and is a more creative thinker.  David Glasner and Bill Woolsey know more economic history than I do.  Marcus Nunes and Lars Christensen work harder than I do.  So it’s a real group effort, and I think we complement each other well.  Then there’s Robert Hetzel, who is at the Fed itself, but whose new book on Fed policy is the single most influential market monetarist research in recent years, at least within the profession.  Indeed once you start naming names it’s hard to know where to stop.  George Selgin isn’t in the market monetarist camp, but first developed some of the pro-NGDP arguments used by market monetarists.  He’s also given me good advice on research.  All the George Mason bloggers have been an inspiration.  In late 2008 a student named Tianning Yu gave me the idea for doing a blog.  And of course the many commenters have been a huge help.  Being forced to defend my position against strong arguments has made me sharpen my message, and once in a while it’s led me to change my views.

In case you missed the announcement, before I went to China I decided I wouldn’t respond to comments this fall.  I am teaching an extra class, and have lots of other activities planned.  I still read the comments. Inevitably I do answer a few, but don’t be offended if I don’t get to yours.  I can announce that the Independent Institute has agreed to publish my Depression book, probably in mid-2013.  It’s been a long struggle.  I do plan on doing a book on the issues discussed in my blog, but given how long the Depression book took I won’t make any promises on timing.


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41 Responses to “Does this mean I get blamed when the hyperinflation arrives?”

  1. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    14. September 2012 at 12:52

    Yeah, you’d better get to work on your reply to Gramm and Taylor.

  2. Gravatar of Saturos Saturos
    14. September 2012 at 12:52

    Way to go Scott! Thank you so much for everything you’ve done!

    *hedges against Scott being wrong about everything*

    You fool. Of course this was the beginning of the end. Your central planning will never- nah, I’ll just let Major_Freedom finish that comment.

  3. Gravatar of Saturos Saturos
    14. September 2012 at 12:53

    Someone should photoshop this image: http://en.wikipedia.org/wiki/File:Who_Is_John_Galt.JPG

  4. Gravatar of George Selgin George Selgin
    14. September 2012 at 12:56

    Congratulations, Scott, on the Independent Institute book deal.

  5. Gravatar of Liberal Roman Liberal Roman
    14. September 2012 at 13:02

    OT: For some real funny stuff, read some ZeroHedge.com as they freak out about Bernanke’s move. This stuff used to make me mad, but now that our view is main stream, it just makes me laugh.

  6. Gravatar of Saturos Saturos
    14. September 2012 at 13:02

    “Who is Scott Sumner? This is Scott Sumner speaking. I am the man who loves NGDP. I am the man who does not sacrifice his pragmatism or his rational expectations. I am the man who has deprived you of victims and thus has destroyed your world, and if you wish to know why you are perishing-you who dread easier money-I am the man who will now tell you.

    “You have heard it said that this is an age of financial capitalist crisis. You have said it yourself, half in fear, half in hope that the words had no meaning. You have cried that man’s sins are destroying the world and you have cursed human nature for its unwillingness to practice the virtues you demanded. Since virtue, to you, consists of sacrifice, you have demanded more sacrifices at every successive disaster. In the name of a return to growth, you have sacrificed all those evils which you held as the cause of your plight. You have sacrificed rules to discretion. You have sacrificed independence to political reaction-functions. You have sacrificed rational expectations to animal spirits. You have sacrificed wealth to bailouts. You have sacrificed the prestige of economics to the denial of its validity. You have sacrificed economic hope to economic despair.

    “You have destroyed all that which you held to be evil and achieved all that which you held to be good. Why, then, do you shrink in horror from the sight of the world around you? That world is not the product of your sins, it is the product and the image of your virtues. It is your moral ideal brought into reality in its full and final perfection. You have fought for it, you have dreamed of it, and you have wished it, and I-I am the man who has been blogging relentlessly for four years to change your minds.

    “While you were complaining about the Fed’s impotence and irrelevance-I beat you to it, I reached them first. I told them the nature of their ongoing mistakes and the nature of that pragmatic mechanisms they could employ to communicate further easing intentions, which they had been too innocently generous to grasp. I showed them the way to live by another monetary policy- policy expected to succeed. It is mine that they chose to follow.”

  7. Gravatar of Saturos Saturos
    14. September 2012 at 13:04

    ” …too pathetically Wicksellian-on-the-concrete-steppes to grasp.”

  8. Gravatar of Major_Freedom Major_Freedom
    14. September 2012 at 13:08

    Ayn Rand is rolling in here grave.

  9. Gravatar of Saturos Saturos
    14. September 2012 at 13:10

    That’s an Ayn Rand reference, btw. You don’t have to like her, it’s still funny.

  10. Gravatar of Saturos Saturos
    14. September 2012 at 13:14

    Scott, you know they couldn’t overrate you if they tried.

  11. Gravatar of Cthorm Cthorm
    14. September 2012 at 13:41

    ““You have heard it said that this is an age of financial capitalist crisis. You have said it yourself, half in fear, half in hope that the words had no meaning. You have cried that man’s sins are destroying the world and you have cursed human nature for its unwillingness to practice the virtues you demanded. Since virtue, to you, consists of sacrifice, you have demanded more sacrifices at every successive disaster. In the name of a return to growth, you have sacrificed all those evils which you held as the cause of your plight. You have sacrificed rules to discretion. You have sacrificed independence to political reaction-functions. You have sacrificed rational expectations to animal spirits. You have sacrificed wealth to bailouts. You have sacrificed the prestige of economics to the denial of its validity. You have sacrificed economic hope to economic despair.”

    It never struck me how appropriate the obsession with the Mayan Calendar is among the ignorant.

    And Major, I don’t think for a moment that Ayn Rand would be rolling in her grave. She was not a Rothbardian, in fact she was not particularly concerned with monetary policy or Aggregate Demand. Ayn Rand idolized the supply side and rejected attempts to constrain it. Gouging out the eyes of discretionary monetary policy, including liquidationist bloodletting, only frees the supply side innovator.

  12. Gravatar of Major_Freedom Major_Freedom
    14. September 2012 at 13:50

    Cthorm:

    And Major, I don’t think for a moment that Ayn Rand would be rolling in her grave. She was not a Rothbardian, in fact she was not particularly concerned with monetary policy or Aggregate Demand.

    You’re so wrong it hurts.

    “So you think that money is the root of all evil?” said Francisco d’Anconia. “Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?”

    “When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor – your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money. Is this what you consider evil?”

    and then

    Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: ‘Account overdrawn.’” – Francisco d’Anconia’s “money speech.”

    Ayn Rand was well aware of how the movement towards fiat paper was a degradation.

  13. Gravatar of Major_Freedom Major_Freedom
    14. September 2012 at 13:53

    Cthorm:

    Ayn Rand idolized the supply side and rejected attempts to constrain it. Gouging out the eyes of discretionary monetary policy, including liquidationist bloodletting, only frees the supply side innovator.

    Supply should not be constrained.

    Fiat money monopolized by central banks presupposes “discretionary monetary policy”. Central bankers have to decide how much money is to be printed, who the first receivers of the money should be, and what goods or assets, if any, should be the goods or assets to acquire in exchange for the newly created dollars.

    Ayn Rand wanted fiat money to be abolished. Her protege, Alan Greenspan, wrote an article praising gold and attacking fiat paper, in the 1960s, before he became Fed chairman and acted completely opposite to his (alleged) convictions.

  14. Gravatar of Major_Freedom Major_Freedom
    14. September 2012 at 13:56

    Supply side innovators are only freed if they are free to produce and use their own money, completely independently of state law (coercion).

    Sound money, not fiat money, maximizes innovation.

  15. Gravatar of ChargerCarl ChargerCarl
    14. September 2012 at 14:20

    If Ayn Rand was against it then I’m for it.

  16. Gravatar of johnleemk johnleemk
    14. September 2012 at 14:26

    Ryan Avent has a great explanation of the recent intellectual history of monetary policy leading up to the Bernanke announcement: http://www.economist.com/blogs/freeexchange/2012/09/monetary-policy-4

  17. Gravatar of Martin Martin
    14. September 2012 at 14:36

    “I can announce that the Independent Institute has agreed to publish my Depression book, probably in mid-2013. It’s been a long struggle.”

    Congrats Scott, looking forward to it!

  18. Gravatar of Matt Waters Matt Waters
    14. September 2012 at 14:47

    I honestly wonder about the psychology of the people behind the crazy hard money comments at places like BI and ZH. I don’t mean about disagreeing with us like MF does. I mean frothing-at-the-mouth, bashing-head-against-the-wall pure vitriolic anger at the very mention of anything dealing with monetary policy.

    And one thing you are sure not to find is any sort of actual evidence. 99% of these hard money comments are asserted as axiomatic, without any supporting evidence. One comment, for example, said that if government couldn’t print money, then there would be no foreign wars.

  19. Gravatar of Major_Freedom Major_Freedom
    14. September 2012 at 15:13

    ChargerCarl:

    If Ayn Rand was against it then I’m for it.

    Ayn Rand was for:

    Free markets.

    Non-initiation of force.

    Reason, as opposed to faith, as the proper means to understanding the world.

    ————

    So I take it then that you are a violent, communist creationist?

  20. Gravatar of Jeff Jeff
    14. September 2012 at 15:14

    In answer to your question, yes. Absolutely.

    Sincerely,

    A registered Zero Hedge user

  21. Gravatar of ssumner ssumner
    14. September 2012 at 16:45

    Thanks everyone. If I had to guess I’d say the probability of hyperinflation is near zero, but the probablity that we will fall short of Avent’s 200,000 jobs a month prediction are near 60%.

  22. Gravatar of StatsGuy StatsGuy
    14. September 2012 at 17:38

    Scott,

    Hyperinflation won’t happen… higher than desired inflation, perhaps, hyper not close. The Fed could crush inflation any time it wants. The Federal govt. is not at risk of losing access to debt markets – where is the excess of global savings going to go? If it goes into stocks or hard assets, then nominal revenues to the govt. skyrocket. Very little debt is inflation indexed. Most importantly, we have no external obligations that are denominated in a non-dollar currency, which is the nearly universal driver of hyperinflation (yes, Weimar, Argentina, you name it). We aren’t trying to hold a currency peg (far from it, PLEASE sell dollars and make our exports cheaper!!!). Our ONLY threat is inelastic demand for oil which creates a need to sell dollars (even at bad terms of trade) for oil, and that threat is lessening by the day.

    Lacker says the Fed will be forced to recant the low interest rate pledge by 2013. Unlikely in the extreme, but we can only hope he’s right!

    Nice job Scott. Very nice job. Some day, we still need to buy you that beer at Watch City, if you aren’t too famous yet.

    Speaker engagements aside, consider the likelihood that you had a hand in saving thousands of lives, and improving millions more.

    I also wanted to call you out for courage – I do not believe those statistics about most of wall street not wanting QE3, or most economists thinking it would cause harm. I think many of those who publicly opposed QE3+++ probably wanted it and/or thought it might help, but succumbed to pressure to be “level headed”, “hard thinking”, and “a realist”. They were like journalists who write conservative stories for fear of being accused of being liberals.

    Aggressive Fed action was unpopular largely because it was somehow uncool. The “tough minded” hard thinkers knew we needed to swallow the “bitter pill”, and only the weak minded cretins wanted to take the easy way out and sacrifice the future generations.

    You were the principled kid who stood up to a bunch of bullies. Most of us here cheered you on, which is easy to do when our reputations aren’t on the line. It took a lot of courage for you to hold out for 4 years… Courage, and _maybe_ just a little bit of egoism. :)

    I owe Jim for turning me on to this blog 3.5 years ago. I hope he’s reading.

  23. Gravatar of TOSOC TOSOC
    14. September 2012 at 17:49

    From the other side of capitalism, it appears that you, Krugman, and the others are still thinking inside the old-style capitalist box. Rather than limiting ourselves to one currency and a “one size fits all” monetary policy, why not take a look at the possible advantages of multiple currencies with multiple monetary policies? Separate policies targeted toward different sub-populations? We already do that to some extent with food stamps.

    Europe provides a more understandable case for this than the United States. The problem for the ECB and other policymakers is that they are stuck with a single currency through which to implement policies for both Germans and Greeks. The result is that the actual policies they make are not best for either one, and the lingering crisis in Europe goes on.

    Suppose the governments and competitive businesses used the euro while the Greeks set up internal markets using the drachma, and restricted the ownership of drachmas to participants in its internal markets (something that technology has only recently made possible)? The Greek government would control transactions between the external euro market and the internal drachma market. That would make it easier for Greece to deal with the external euro policies while at the same time tailoring an internal drachma policy to help get its less-competitive people and businesses back in the game.

    tosoc.org

  24. Gravatar of Charlie Charlie
    14. September 2012 at 18:09

    Scott,

    Does the recent Fed move at all change your view of the inner workings/ power dynamic at the Fed? My take, is that you believe Bernanke is a market monetarist ally that was working behind the scenes to try to get a more expansionary Fed, but was stifled by other members. An extreme counter critique would be that Bernanke has always underrated the expectations channel or that he overrated the likelihood of recovery. It took Woodford to finally convince him at Jackson hole, and then he went out and got the votes he needed 11 to 1.

    How should the timing of this affect our view of what’s happening in the inner circle at the Fed? Why did this happen now?

  25. Gravatar of Tim Tim
    14. September 2012 at 19:59

    Hi Scott
    Theres a new study from the NY fed that you don’t want to miss. Its by David Lucca and Emanuel Moench and they talk about the influence of FOMC announcements on stock prices. The S&P index would only have increased to 600 in march 2011 from 440 in 1994 if the effect of all the Fed announcements were taken out. 80% of returns have been earned in the 24 hours before FOMC announcements.
    They call the effect FOMC drift, but I don’t have a link to the paper, unfortunately.

  26. Gravatar of Matt Waters Matt Waters
    14. September 2012 at 22:15

    Here is the link to that NY Fed study. It is quite interesting:

    http://libertystreeteconomics.newyorkfed.org/2012/07/the-puzzling-pre-fomc-announcement-drift.html

    Seeing some weird stuff like this in the markets are part of the reason I’m not too firm of a believer in stronger EMH narratives. My guess is the stocks appreciated around FOMC announcements because of increased trading volume and speculation, and the stocks did not go back down afterward.

    It is worth pointing out that the immediate reaction to this FOMC reaction is far bigger than the tiny average reaction to the actual FOMC announcement in the NY Fed study. The average reaction is less than 0.1%. The reaction for this FOMC announcement was 0.8% immediately and went up to 1.6% towards the end of the day.

  27. Gravatar of Saturos Saturos
    15. September 2012 at 02:30

    TOPOC, you’re right, Greece would be much better off outside the Euro. (Now you explain why their government has not exited it yet.) But currency/capital controls would only make Greek standards of living worse, trust me on that. (Trust history on that.)

    As for multiple currencies, many market monetarists believe that the optimal monetary policy would be money privatization, automatically adjusting the aggregate supply of money to meet the demand for holding on to it at the healthy level of aggregate spending. I’m not so sure though. But even a central bank that promised to conduct monetary policy by setting clear quantitative targets which it regarded as maximizing economic health, and then adjusting policy until they themselves expected to hit it, would be a massive step forward to economic stability. Half of which may have been taken on Thursday.

  28. Gravatar of Saturos Saturos
    15. September 2012 at 02:52

    Another magnum opus by Ryan Avent.

  29. Gravatar of dtoh dtoh
    15. September 2012 at 04:40

    Scott,
    I think it’s now accurate to describe you as the….

    “The Most Influential Economist of the 21st Century.”

    88 years left for someone to take the title away, but for now, you’re the man. Congrats!!!

  30. Gravatar of Saturos Saturos
    15. September 2012 at 05:33

    Time Person of the Year? Foreign Policy Magazine Top 100 Intellectual? The possibilities are endless.

  31. Gravatar of Saturos Saturos
    15. September 2012 at 06:10

    Oh Shit: http://marginalrevolution.com/marginalrevolution/2012/09/can-bernanke-precommit.html

  32. Gravatar of Saturos Saturos
    15. September 2012 at 06:30

    The independent institute must be very ecumenical. Here it is calling the new Fed policy “crony capitalism”: http://blog.independent.org/2012/09/13/the-feds-new-foray-into-crony-capitalism/
    http://blog.independent.org/2012/09/14/gm-qe3-and-crony-capitalism/

  33. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    15. September 2012 at 08:41

    The Avent piece is much better than the Atlantic one, and if he’s right it would be Barack Obama who owes him a beer.

    Which brings up the question, while he may not always drink beer, when he does, is Scott’s choice Dos Equis?

  34. Gravatar of Mike Sax Mike Sax
    15. September 2012 at 10:18

    Avent’s 200,000 jobs may sound like a lot-but we’ve averaged 141,000 a month this year-153,000 last year. So it’s really just a question of whether QE3 gets us 50,000 per month.

    Note that if we were adding rather than subtracting state and local jobs we would also be at 200,000. So if monetary stimulus is better than fiscal maybe it will get us there.

  35. Gravatar of Mike Sax Mike Sax
    15. September 2012 at 10:20

    What would make Ayn Rand spin in her grave was Ryan’s Medicare plan-she spent her last years “on the dole.’

  36. Gravatar of ssumner ssumner
    15. September 2012 at 10:30

    Charlie, There were many things that affected Bernanke’s thinking. But don’t understimate the importance of unemployment getting stuck at 8.1% all year, when it had been falling pretty consistently over the previous 2 years.

    Thanks Statsguy, I’m still up for Watch City, although I’m afraid I’m no longer much of a drinker.

    Saturos and dtoh, More likely this is my 15 minutes of fame, and I’ll be forgotten tomorrow. No one is beating down my door for lucrative speaking engagements.

  37. Gravatar of Free Banking » 2003 Redux, or, Why Market Monetarists Had Better Start Talking the Dangers of QE3 Free Banking » 2003 Redux, or, Why Market Monetarists Had Better Start Talking the Dangers of QE3
    15. September 2012 at 13:43

    [...] the title of a recent post Scott Sumner jokingly wonders whether, having been credited by the press for badgering Ben [...]

  38. Gravatar of Saturos Saturos
    16. September 2012 at 01:45

    Mike, why should Ayn Rand have turned down the public insurance which the state had been forcing her to pay for all her life?

  39. Gravatar of chris mahoney chris mahoney
    16. September 2012 at 09:38

    No, Scott. It means that when the Fed ends QE3 prematurely, you will be “proven wrong”.

  40. Gravatar of Wanted: Governor « uneconomical Wanted: Governor « uneconomical
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