Market monetarism is on the march
Cardiff Garcia quotes from a recent report by James Sweeney at Credit Suisse:
Many commentators point to high debt levels as a major driver of the [2008] crisis. However, high debt levels signal vulnerability, not imminent crisis. Crisis occurs when highly leveraged entities suddenly cannot service their debts. This is most likely when nominal growth suddenly slumps, or when asset prices fall sharply.
Of course, those two things often happen together. And what’s most likely before a sharp decline in nominal growth and asset prices is a boom in both. . . .
We believe policymakers are so scarred by the events of 2008 that they live in constant fear of anything resembling a recurrence. The simplest way to prevent recurrence has little to do with achieving 2% inflation and much to do with minimizing the variance of nominal growth, preferably while maintaining full employment.
Macroprudential policy and financial stability monitoring may help with these goals, but ultimately monetary policy is the tool most likely to prevent large cyclical swings in nominal growth.
We’re winning.
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5. May 2016 at 11:01
Good. I like winning. Especially when it’s the side I support that does it.
5. May 2016 at 11:07
How long before NGDP targeting is instituted in a single central bank?
5. May 2016 at 11:09
“The simplest way to prevent recurrence has little to do with achieving 2% inflation and much to do with minimizing the variance of nominal growth, preferably while maintaining full employment.”
Very true!
https://thefaintofheart.wordpress.com/2013/10/04/the-great-moderationthe-great-stagnation-not-according-to-phase-diagrams/
5. May 2016 at 12:08
“we’re winning” said the armless, legless Monty Python Dark Knight, said John Dilinger, said George W. Bush in Iraq, said Custer at the Last Stand…. said Scott Sumner. O-kay.
5. May 2016 at 12:12
Now we just need Trump to endorse NGDP targeting, and watch Scott’s head explode 😉
5. May 2016 at 12:56
Harding, About 15 years.
5. May 2016 at 15:30
OK. Sounds like a long time, but I’ll check back in 2030.
5. May 2016 at 15:50
Go MM!
Now if we can just get the Fed, the ECB, the BoJ, and the PBOC on board, we would have something going.
5. May 2016 at 18:15
@Ray Lopez
You forgot Hitler in the bunker. Appropriate, since Scott is so good at throwing around the Nazi accusation.
6. May 2016 at 00:14
At the Hoover monetary conference yesterday, Williams, Lockhart, and Kaplan agreed that “low inflation is the question of our time.” They also agreed that the Fed should raise rates this year, and Kaplan stated that he would push for a raise this June. Truly, low inflation is the mystery of our time.
6. May 2016 at 05:40
Oderus, Actually I don’t, but my Trumpistas readers are too dense to understand nuance, so they think I am.
A, Thanks for that info. I see this all the time in the media, I’m not surprised it pops up at conferences.
6. May 2016 at 12:26
– I have a different read of this text. “We must tame the business cycle”. That’s what written here. But the business cycle can’t be tamed. No matter what the “market monetarists” think.
7. May 2016 at 10:45
Market monetarism is on the march yes, and the people the market monetarists are advising are armed and ready to introduce gun violence into society in order to maintain the monetary monopoly should it be revealed as fraudulent by a sufficient number of people.
8. May 2016 at 01:11
You may not have seen this?
“Scott Sumner provides two very important components to his NGDP target proposal.”
http://static1.squarespace.com/static/56eddde762cd9413e151ac92/t/56f7101e59827ebb74c57a48/1459032096367/Sound-Money-AJE-De-typo.pdf
9. May 2016 at 06:38
Scott, this comment is correct and is relevant to your earlier post asking about debt levels:
“Crisis occurs when highly leveraged entities suddenly cannot service their debts.”