Several commenters have asked me what I think about the new head of the Bank of England, Mark Carney. I don’t have much to add beyond what’s been said by people like Nick Rowe and Matt Yglesias. In my view the Cameron government has several options:
1. Tell the BOE to change its policy to a 5% or 6% NGDP target for 2 years, 4% thereafter.
2. Tell the BOE to continue with its 2% inflation target.
If they opt for the NGDP target, then fiscal stimulus would be pointless.
It they opt for the 2% inflation target, then they are essentially telling the BOE to sabotage any fiscal stimulus that might be done (Britain has averaged 3.3% inflation over the past 5 years.)
When would fiscal stimulus be appropriate for a country averaging 3.3% inflation? Give me a minute to think about it . . .
. . . still thinking . . .
. . . don’t rush me . . .