Prices work at the speed of light. Quantities; not so fast.

One of the great frustrations of discussing monetary policy is that most people buy into the notion that when the Fed is “doing something” we should see changes in short term rates and/or the money supply.  In fact, it is expectations of future policy that drive AD. 

There are several problems with trying to find links between movements in the money supply, and changes in the economy.  First, the Fed is not usually trying to conduct natural experiments.  They are trying to stabilize the economy.  Thus they will often move the money supply in response to changes in money demand.  Markets understand this, and hence often don’t react much to changes in the money supply.

Even worse, an exogenous change in the money supply, even when not done in response to changes in the demand for money, may have little impact if expected to be temporary.  If we put these two facts together, then policy will only affect AD when it is not responding to money demand fluctuations, and is not expected to be temporary.  But how can the markets know this?  After all, the Fed rarely announces “we are setting out on a plan to create the Great Contraction, or the Great Inflation.”  Instead, markets gradually become aware of the fact that monetary policy is drifting off course.  And it is at precisely this moment, when markets understand that the change in the money supply is no fluke, that we observe market reactions.  Of course changes on the broader economy are closely correlated with those market reactions.

Here’s an example.  Suppose in the 1960s the Fed ran an easier than normal monetary policy.  At first inflation would only rise a bit.  Why bid up houses to twice their normal level, if you expected the Fed to soon return to its longstanding practice of low inflation.  Then gradually, little by little, people realize that monetary policy is changing in a fundamental way.  This time was different.  There may be signals, such as the breakdown of Bretton Woods, but even those changes may be partly endogenous.  In any case, once the policy is recognized as permanent, the prices of assets such as commodities and real estate will start to rise faster.  Stocks are more complicated, rising with the price level, but falling with higher rates of inflation (due to the inflation tax effect.)

This delayed reaction led many monetarists (and non-monetarists) to assume that there were “long and variable lags” between changes in monetary policy and aggregate demand.  In fact, the lags are extremely short.  The problem was that monetary shocks were misidentified, assumed to begin when the money supply changed; whereas they actually begin from the moment the money supply increase was viewed as permanent.  Thus some people argue that the bloated level of bank reserves is a sort of time bomb, waiting to explode into higher prices with a long lag.  Instead, markets don’t expect the Fed to ever allow the bomb to explode, they expect the Fed to eventually pull the reserves out of circulation, or else pay higher rates of interest to encourage banks to hold on to the reserves.  And if it does explode into high inflation, the “cause” won’t be the current rise in the base, but rather the later decision not to do something about it—the something the market now expects the Fed to do. Even the great Milton Friedman missed this insight.

How can I so arrogantly assert that the economics profession is wrong about long and variable lags?  Because there are other types of monetary policy that have an immediate effect on the future expected money supply.  And these alternative policies also immediately affect asset prices and AD.  Indeed, according to the EMH, the standard view would only make sense if there were long lags between asset prices (which are surely impacted right away) and the broader level of AD.  But if that were true then business cycles should be forecastable; which they are not.  Hence the “variable lag” cop-out. 

Fortunately, there are other ways of doing monetary policy, techniques that can immediately influence the future expected money supply.  The one I most often talk about is the 1933 decision to raise the price of gold.  This immediately raised the future expected price level (via PPP) the future expected money supply (price-specie-flow), future expected NGDP, and thus the current level of AD.  I like to think of higher levels of future expected NGDP as being what Keynes meant in his frequent references to “confidence” in the General Theory.  Keynes had great intuition, but wasn’t able to effectively work that intuition into abstract models of nominal shocks.  

Of course we don’t need to go back to the gold standard, any currency devaluation will work just as well—assuming the devaluation is an exogenous monetary policy shock, and not the fall in the real exchange rate due to an economic crisis.  (The 2002 Argentine devaluation saw a bit of both.  NGDP started rising immediately, but RGDP was temporarily depressed by economic turmoil.)   But why are currency devaluations so powerful?  The reason is that they tend to be highly credible.  When a country is operating under a fixed exchange rate regime, it loses enormous credibility and reputation by devaluing.  Therefore they often hold off until the bitter end.  Once they take that painful step, there would be no reason for the policy to be reversed.  Thus when a large devaluation occurs, it is generally the case that the future expected exchange rate (i.e. the forward rate) falls by about the same amount.  This immediately raises the future expected price level, and hence current AD.  The lags are very short. 

In some cases the effect is even more certain.  When a country’s nominal interest rate is near zero, the rate cannot fall further.  The interest parity theorem shows that if you do a major devaluation, the exchange rate cannot be expected to appreciate back to the old level unless nominal interest rates fall significantly.  But that can’t happen at zero nominal rates, and is why people like Lars Svensson argued that depreciation of the Japanese yen was a “foolproof” way out of their liquidity trap.  

The US can’t really use the exchange rate as a policy tool, it is too controversial.  But there is a price it can use, CPI or NGDP futures.  If the Fed sets a higher explicit nominal target, the effect is almost identical to currency devaluation—AD is affected immediately.  When I debated Jim Hamilton last year, I recall he was skeptical of my assertion that NGDP targeting would have prevented the economy from falling off the cliff in late 2008.  I think he was relying on the long and variable lags concept.  That would have been a good argument if my proposed policy tool was money supply expansion or a lower fed funds target.  Those changes might have had little effect on future expected policy, and hence future expected NGDP.  But an explicit NGDP target would be different.  As with currency devaluation, it would immediately change the future expected path of NGDP, and hence prop up current NGDP as well.  The Fed may try something new in the next few months.  It will either work right away (observable in the market reactions) or not at all.

We have two languages for discussing monetary policy.  The fed funds rate/money supply language is full of mysterious long and variable lags, and makes intelligent conversation almost impossible.  Literally any outcome can be assumed, depending on your assumptions about the future stance of policy.  (On the other hand, the alleged perfect substitutability between cash and T-bills is nearly irrelevant.)    If we shift monetary policy talk to prices, we can immediately pin things down.  It could be the price of gold, a basket of commodities, a foreign exchange rate, the overall price level, or NGDP.  What’s important is that this sort of discussion almost always has implications for future policy as well, and that’s what we need to know to pin down the current stance of policy.  Intertemporal arbitrage connects current and future prices.  Unfortunately, as we saw in the New York Times story I just posted on, almost all M-policy talk continues to refer to near-term levels of short term rates and the monetary base.  Which means we are still talking gibberish.


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30 Responses to “Prices work at the speed of light. Quantities; not so fast.”

  1. Gravatar of Benjamin Cole Benjamin Cole
    29. July 2010 at 12:52

    OT but relevant to this blogger: http://research.stlouisfed.org/econ/bullard/pdf/SevenFacesFinalJul28.pdf

    Bullard of St. Louis Fed talks about QE, seriously.

  2. Gravatar of jj jj
    29. July 2010 at 13:04

    I completely agree that “The fed funds rate/money supply language is full of mysterious long and variable lags, and makes intelligent conversation almost impossible.” Like the old wage/price-spiral language, it sounds plausible if you say it with confidence. When I was getting into Econ as a teenager, I couldn’t figure out if I just wasn’t clever enough to understand all of this, or if there really were some big gaps in the field’s common understanding. Every macro story seemed to work according to an ill-defined, open-ended system.

    My perspective now is that great economists and entire schools of the past have been each discovering true facets of the economy, yet are seen to be in competition or disagreement with each other. I’ve moved from my younger view of Keynesian-ism, that it is garbage, to the view that it is 90% true with just enough missing to make it downright dangerous for policy prescriptions. I’m not familiar enough with Friedman to know if there are any fatal flaws in his models.

    Is Sumner advocating a synthesis to Keynes and Friedman’s thesis and antithesis? If earlier macro views are only facets of the truth, is the rationale behind NGDP targeting a super-macro view, the End of History? Who knows. Right now it seems truer, more logical, more of a closed system than any other I’ve heard. Maybe it’s not true but only truer. That seems to be how economics has been progressing: try the latest model out for 40 years or so, and when it blows up, you’ll have 1 more data point to improve upon the old model.

  3. Gravatar of marcus nunes marcus nunes
    29. July 2010 at 14:04

    Maybe Friedman “invented” long and variable lags because he didn´t think people had forward looking expectations, they only “gradually learned what was going on”

  4. Gravatar of Morgan Warstler Morgan Warstler
    29. July 2010 at 14:05

    http://krugman.blogs.nytimes.com/2010/07/29/deflation-risks/

    Hmmm, if only we could think of something that would cause the banks to start loaning…. what could it be??

    Wait I know! Maybe the insolvent banks should be forced to liquidate the homes they are sitting on… because they are insolvent!

    And then when those really cheap assets go up on the block, the remaining banks will have plenty of super cheap deals to loan against…. even at higher interest rates.

    Apart from fear of government regulation, price is the only thing keeping deals from getting done.

    There’s no reason not to try a meaningful auction. The truth on prices will set us free.

  5. Gravatar of Fed Up Fed Up
    29. July 2010 at 15:05

    “I like to think of higher levels of future expected NGDP as being what Keynes meant in his frequent references to “confidence” in the General Theory.”

    I like to think of confidence as trying to get the monthly payment consumer to go further into debt.

  6. Gravatar of Fed Up Fed Up
    29. July 2010 at 15:11

    “First, the Fed is not usually trying to conduct natural experiments. They are trying to stabilize the economy.”

    How about the fed is trying to grow and stabilize an economy using more and more debt (future demand brought to the present) as the lower and middle class lose their ability to retire because of the debt?

  7. Gravatar of Fed Up Fed Up
    29. July 2010 at 15:13

    “Intertemporal arbitrage connects current and future prices.”

    Is a medium of exchange needed for that?

  8. Gravatar of Morgan Warstler Morgan Warstler
    29. July 2010 at 15:40

    @Fed Up

    So then, I have your vote? We take on less debt, we liquidate the insolvent banks, the surviving banks likely have to sell equity, the price of real estate goes down, so that lower and middle class have smaller rents, the those with dry powder become landlord and have better balance sheets.

    I just want to affirm that the selling of 4M+ homes at bargain basement prices, but only to those with sizeable deposits, isn’t bringing future demand forward – it is a one time payday (the down cycle pays off for bears), to liquidate unsold non-performing inventory.

  9. Gravatar of Andy Harless Andy Harless
    29. July 2010 at 16:45

    “…the standard view would only make sense if there were long lags between asset prices (which are surely impacted right away) and the broader level of AD. But if that were true then business cycles should be forecastable; which they are not.”

    Business cycles should be forecastable if people knew the relationship between asset prices and aggregate demand, but there is a lot of uncertainty about that relationship. Also, not all asset markets are efficient: bond markets may be efficient, for example, but interest rates clearly affect house prices with a lag. Houses are assets, but they are highly illiquid, so their prices don’t respond immediately to the fundamentals. In the previous business cycle, I see aggregate demand responding with a long lag, not because the Fed’s policy was not credible, but because the housing market is inefficient. The bond market was convinced pretty quickly that the real interest rate would stay low for a while (as you can observe, say, in the 10-year TIPS), but it took several years for the housing market to respond fully. And the business cycle was not forecastable because it was difficult to predict in advance how strongly or how quickly the housing market would respond.

  10. Gravatar of scott sumner scott sumner
    29. July 2010 at 16:48

    Benjamin, Thanks. Consider my new post to be the response.

    jj. You said:

    “Is Sumner advocating a synthesis to Keynes and Friedman’s thesis and antithesis? If earlier macro views are only facets of the truth, is the rationale behind NGDP targeting a super-macro view, the End of History?”

    Yes, I think my blog represent the end of macro, the definitive summation of all knowledge in the field . . . not!
    Seriously, I appreciate the compliment, but I continue to learn along the way, often from my excellent commenters. It’s too complex a field to ever run out of steam.

    marcus, Yes, and he wasn’t yet aware of the Lucas critique, which makes it difficult to draw policy conclusions from the data.

    Morgan, We don’t need “deals” we need jobs. Deflation can produce lots of “deals” for pawn shops.

    Fed Up, The Fed is focused more on money than debt, at least during normal times when there is no debt crisis.

    Fed Up, I don’t think we need a medium of exchange for arbitrage, but it helps.

  11. Gravatar of scott sumner scott sumner
    29. July 2010 at 16:57

    Andy, I have two observations.

    1. If you’d showed me the asset price graphs for late 2008 (stocks, commodities, TIPS spreads, commercial RE prices, etc. I would have predicted a major recession without any shred of uncertainty. Not any one graph, but all four together. The reason we can’t forcast major recessions isn’t that they are not closely correlated with asset prices (the signature is quite distinct) but rather because we can’t forecast the asset prices that are so intertwined with severe recessions. (BTW, 1987 shows that you cannot rely on a single asset market to forecast cycles.)

    2. You said:

    “The bond market was convinced pretty quickly that the real interest rate would stay low for a while (as you can observe, say, in the 10-year TIPS), but it took several years for the housing market to respond fully.”

    But low real interest rates are not indicative of easy money, but rather of a weak economy. So money was actually getting easier as we moved from 2003 to 2005, even though real rates might have been rising.

  12. Gravatar of Bob O’Brien Bob O'Brien
    29. July 2010 at 17:29

    Could someone explain at a micro level how the fed creating a “higher level of future expected NGDP” increases AD and thus improves the economy and creates jobs. Some specific examples would help.

    I find it easy to understand that higher levels of NGDP is closely correlated to a growing AD. However, I seem to have missed the explanation of how it can “Drive” up AD. (I have the same discussion with my doctor. He tells me my high cholesterol can be associated with a heart attack but he also says there is no solid evidence that it “Causes” heart attacks.)

  13. Gravatar of JG JG
    29. July 2010 at 17:47

    It wouldn’t be so mysterious if the discussion were simply couched in terms of differential equations systematically. Stuff like lagging responses are everyday fare with DEs.

  14. Gravatar of Fed Up Fed Up
    29. July 2010 at 18:08

    Morgan Warstler said: “@Fed Up

    So then, I have your vote? We take on less debt, we liquidate the insolvent banks, the surviving banks likely have to sell equity, the price of real estate goes down, so that lower and middle class have smaller rents, the those with dry powder become landlord and have better balance sheets.”

    Partially. I believe we need to tighten the labor market so workers can get their fair share of productivity gains as wage increases and real wage increases. This will probably raise price inflation and raise interest rates. Some people will be able to afford their payments now, some won’t. Some banks will be insolvent, some won’t.

    And “I just want to affirm that the selling of 4M+ homes at bargain basement prices, but only to those with sizeable deposits, isn’t bringing future demand forward – it is a one time payday (the down cycle pays off for bears), to liquidate unsold non-performing inventory.”

    Any debt seems to me to be bringing future demand forward, but relatively speaking higher down-payments (more from savings and less from debt) should not be bringing future demand forward. The price of real estate goes down in the present and near future until people are able to SAVE ENOUGH for a sizable deposit (down-payment). The biggest problem I see is that the lower prices (either housing or rents)will “encourage” a decrease in supply so that “markets” can someday in the future create a shortage leading to the same old debt ways.

    In “fungible money supply” terms, there needs to be more currency (present demand in the present) and less debt (future demand brought to the present).

    Another problem I see is keynesians (maintain debt levels) vs. austrians (just let bad debt go, do nothing else). I’m looking for a different solution than either of those, which basically means reversing what has happened since about 1982.

  15. Gravatar of Fed Up Fed Up
    29. July 2010 at 18:17

    scott sumner said: “Fed Up, The Fed is focused more on money than debt, at least during normal times when there is no debt crisis.”

    Isn’t almost all money debt now (maybe something close to 98%)?

    Isn’t all NEW (emphasize new) money debt?

  16. Gravatar of Fed Up Fed Up
    29. July 2010 at 18:18

    scott sumner said: “Morgan, We don’t need “deals” we need jobs. Deflation can produce lots of “deals” for pawn shops.”

    If there are enough goods and services available, maybe we need more retirees?

  17. Gravatar of Fed Up Fed Up
    29. July 2010 at 18:23

    Bob O’Brien said: “Could someone explain at a micro level how the fed creating a “higher level of future expected NGDP” increases AD and thus improves the economy and creates jobs. Some specific examples would help.”

    I would like to see that too. Most macro people I have read seem to think that velocity and the money supply (I would say debt supply) can fix just about any “micro level” problem. I don’t.

  18. Gravatar of Morgan Warstler Morgan Warstler
    30. July 2010 at 05:16

    Scott, deep down you don’t believe in microeconomics do you? Even though no one is sure macro even exists, and we all know supply demand is real, even at scale.

    Look, in healthcare, education, real estate, and government we have experienced rapidly increasing prices.

    In three of those, (minus healthcare) we’re due for MASSIVE price drops, and those things are large scale purchases. So you worrying about deflation is just ridiculous, because otherwise as we have massive productivity gains in these sectors, you’re going to be moaning for more and more QE.

    If everyone makes the same amount of money, but suddenly teachers get only 25% of the income stream they had before, because cost of education has gone down by 75% – American families are suddenly rich, we all have far less debt, the economy takes off.

    Same thing for government productivity, same for housing productivity – when we stop needing to spend as much money on these stupid things – we’ll have more to spend elsewhere. This is where growth comes from – productivity.

    Seriously, other prices – on real stuff – they are based on commodities and oil (mostly oil), and oil’s price maps to the dollar…. as we are the petro standard.

    When oil goes to $100, who’s going to worry about deflation? You? Seriously? When it goes to $150? You still think the US is Japan, when China starts buying oil again?

    I’m beginning to think the problem is you view housing as in investment. It is not, less than even say gold. It is meant to be rent, pure and simple.

    If you don’t mind my asking, please answer these personal questions….

    You bought you home in 1991, if that price had appreciated 2% per year:

    1. would you view it as an investment?
    2. would you currently be upside down?
    3. did you refinance recently?

    I think deep in your psyche is the assumption that you have been “investing” in your home – and whenever I talk about it losing value, you freak out and want to print money.

    Quick answers to 1,2,3 will help.

  19. Gravatar of scott sumner scott sumner
    30. July 2010 at 06:10

    Bob, One example would be asset prices. These prices are forward-looking. If NGDP is expected to be much higher next year, so will asset prices. That will cause higher asset prices today. Higher prices of stocks, commodities, and real estate causes more investment in corporations, mining, and construction.

    BTW, a crucial assumption is that nominal wages are sticky, so asset prices can rise faster than the cost of building those assets.

    JG, I think the deeper problem is mis-identification of monetary shocks.

    Fed Up. I define money as the monetary base. During normal times that money isn’t really debt at all. It’s like paper gold. Now the Fed pays interest on bank reserves, so I guess that makes things a bit different.

    Fed Up, Shouldn’t we create more jobs, if people prefer to work, rather than retire?

    Morgan, I thought you were the one who didn’t believe in micro, the one who could believed central planners could figure out the appropriate price in each sector of the economy.

  20. Gravatar of Morgan Warstler Morgan Warstler
    30. July 2010 at 07:24

    Scott, oh no you don’t! You’re damn near a commie.

    Targeting NGDP is SOCIALIZING THE LOSSES – you want to keep the losers from losing “if it hurts growth,” meanwhile it is the socialization of losses that hurts growth – in this case we NEED TO SEE the banksters eat it. The bailout must be corrected for, we are morally upside down.

    Sure, you’ll do the easy stuff we agree on:

    1. No interest on reserves.
    2. You might even say you are personally against GSE securitizing MBS, but IF they do it,

    then you turn commie.

    3. You believe Fed can / should buy this crap.
    4. You fight any effort to use the Fed to work against #2.

    Again, the Fed’s job is to keep inflation towards ZERO. Print money ONLY for population growth. Their job is to allow the business cycle to happen, BECAUSE BUSINESS CYCLE = GROWTH. They should view banks as bad actors, and be working to get the home values down, while our equity stays the same.

    PLEASE ANSWER the personal questions about your own home situation, it seems more and more relevant.

  21. Gravatar of Doc Merlin Doc Merlin
    30. July 2010 at 11:37

    @Morgan
    No, No, No, No!

    Before you accuse Scott of being a damned, dirty communist, you should think about this from microeconomics.

    In perfect competition (with perfectly fast adjustment), what happens when demand increases? Does price go up? No, supply goes up instead. What happens when costs to suppliers increase? Then prices go up.

    Because we are no longer on a commodity standard, there is almost no “cost” to printing money so its very difficult for the Fed to decide how much to print. When we target inflation, the fed “steals” value for itself from supply side booms, causing an even larger (unsustainable) boom.
    NGDP targeting doesn’t do that, it increases money production when demand for money is high, and cuts it when demand for money is low. This is the way a competitive business should operate.

    Inflation targeting is bad, because the fed should NOT touch supply side inflation/deflation. When it tries to, it can only mess things up further.

  22. Gravatar of Doc Merlin Doc Merlin
    30. July 2010 at 11:53

    @Bob O’Brien
    1. The fed can’t actually fix any problems that it didn’t cause.
    2. From a micro perspective:
    Assume some long term nominal variable, like say 30 year house loans. (There are many other theories as to what this variable is. Keynesians say that every price and wage acts this way, but all you need is a variable that acts somewhat nominal. I pick house loans because its uncontroversial.)

    Now, expectations are based on what people think will happen and what the fed will do if such events don’t happen. If the fed manages to raise NGDP expectations, people think they have more money to deal with their long term nominal variables (say pay off old debt) so will take on more debt or at least not default on their debt. This is the same as an AD increase. Of course the fed can screw up, by pushing expectations in one direction and then money in the other direction. Which will cause a massive reorganization of the economy.

    The above is what Scott has claimed happened in our recession. It became evident that the fed wouldn’t meet NGDP expectations, so, people had to readjust their behavior as a result.

  23. Gravatar of Morgan Warstler Morgan Warstler
    30. July 2010 at 15:05

    Doc, not for nothing but… read Mish, who I agree with almost absolutely.

    http://globaleconomicanalysis.blogspot.com/2010/07/should-china-dump-dollars-for.html

    Ok, so what we really face is China and Germany continuing to collect dollars and needing to invest them… basically here. This crisis gets worse when we aren’t able / willing to buy stuff – global trade melt down.

    But the thing is WE ARE ABLE TO BUY STUFF IF:

    1. The amount of real equity we own in our homes stays the same.
    2. The total value of the homes (the debt) goes down.

    http://www.ritholtz.com/blog/2010/07/the-4-trillion-dollar-question-2/

    I look at that and think:

    1. Auction EVERY foreclosure for $1 starting bid – to make my math easy – require 40% down. Only let individuals buy. Deals of a lifetime.
    2. Each home sold drops the total national mortgage debt (what we owe the banks), but maintains / trends toward the real dollar equity of .40.
    3. When we reach .40 – STOP the auction policy.

    What we’re effectively doing is screwing the banks into having to sell equity in themselves to survive. And we’re killing the true zombies.

    Suddenly being a banker is no fun, you just had all your profits chewed through for some time AND holy shit, these guys with cash buying MILLIONS of super cheap houses they are basically the ONLY place for you to smartly loan money – since you aren’t getting interest on reserves, and you can’t buy and resell the homes, no you have to make LOANS.

    But unfortunately, the Fed has raised interest rates. So another 6M households stick their keys in mailbox, move someplace for a job, and rent.

    NO WORRIES THOUGH, there’s plenty of sovereign Chinese money willing to buy equity in your banks.

    And HOLY SHIT, rents are WAY down – we just had 12M houses TWELVE MILLION HOUSES sold to the winners of the last business down cycle – the guys who go out.

    And they are renting super cheap, hopefully giving us one more small of cycle of deflation – as multi-tenant places built in last 8 years (the nice expensive apartments) – have to drop rents again, go into foreclosure, SELL EQUITY, etc.

    Now we have reset rents back to pre-2000, hopefully we end the mortgage tax deduction, further depressing rents…

    And suddenly we have 50M lower middle class households keeping an extra 10-15% of their income. And the top half, have either bought long before 2000, and yes their house isn’t worth as much as they daydreamed, but it’s still equity they own…

    Ta-da!

    We’re consumers again. No one wants to be a banker anymore.

    And if that doesn’t work THEN we target NGDP – but hey we’ve raised interest rates along the way, with a CRUCIAL LESSON – lowering interest rates isn’t much fun for bankers.

  24. Gravatar of scott sumner scott sumner
    31. July 2010 at 07:04

    Morgan, You asked.

    “PLEASE ANSWER the personal questions about your own home situation, it seems more and more relevant.”

    I have no debt, mortgage or otherwise. Still think I’m trying to inflate away debt?

  25. Gravatar of Morgan Warstler Morgan Warstler
    31. July 2010 at 07:41

    Scott, I don’t think you are primarily driven to inflate away debt (I think that’s a side effect), I think you may be driven to keep your home value from being diminished.

    I assume you own your home. Is it your main asset? If it is worth only purchase + inflation since you purchased it (in 1991?), does that constitute a significant hit on your savings / retirement?

    If you really don’t have any personal interest wrapped up in this, it will be even harder for me to understand why you don’t want home values to be reset BEFORE we start artificially juicing the economy.

  26. Gravatar of TheMoneyIllusion » Why the Fed won’t directly target exchange rates TheMoneyIllusion » Why the Fed won’t directly target exchange rates
    31. July 2010 at 13:56

    [...] of Kling, here is a recent comment about my views: Scott Sumner [...]

  27. Gravatar of scott sumner scott sumner
    1. August 2010 at 06:31

    Morgan, I’d benefit from a fall in house values, as my next house (and Last?) will be more expensive. So if all homes fell 20%, I’d be better off.

  28. Gravatar of Options for monetary stimulus | Bear Market Investments Options for monetary stimulus | Bear Market Investments
    1. August 2010 at 12:55

    [...] that would probably lead to some sort of worldwide monetary expansion that I imagine would make [Scott] Sumner [...]

  29. Gravatar of Contemplationist Contemplationist
    2. August 2010 at 19:49

    Jeez Morgan. Got a chip on your shoulder? Did a relative take a loan from you and not pay back? Your “arguments” are getting ridiculous. You seem a lot more fixated on LIQUIDATE HOUSING NOW! How are we supposed to do it?

  30. Gravatar of Contemplationist Contemplationist
    2. August 2010 at 19:49

    By we I mean the readers of this blog.

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