Hamlet without the prince

Please read this Financial Times article.  It shows what happens when finance-types analyze monetary policy w/o any discussion of macroeconomics.

PS.  They did mention Chinese “growth,” but there was no mention of NGDP, RGDP  or inflation in the major western economies, which were the focus of the article.


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71 Responses to “Hamlet without the prince”

  1. Gravatar of Major_Freedom Major_Freedom
    12. June 2012 at 06:36

    I knew by Sumner’s comments, before reading the article, that the “tone” of the article was going to be one of skepticism/doubt/antagonism towards central bank inflation.

    Was not disappointed.

    “Next monetary fix” conveys the impression that the central banks are drug dealers, and the markets are dependent addicts. This leads to the impression that the solution is for the drug dealer to stop dealing drugs, or even for the central bank to get out of the market. One person was even quoted as saying

    “Central bankers in Asia have grappled for the past few years with the effects of overly loose monetary conditions. Easing policy further, even if it provides a little relief in the short term, could provide even bigger headaches later on,”

    All this is a market monetarism faux pas. Don’t say there could be problems down the road after a quick fix!

    Ergo this blog post.

  2. Gravatar of Lorenzo from Oz Lorenzo from Oz
    12. June 2012 at 06:49

    in other words, nothing is changing underlying expectations, but they do not know enough to know that is hat they are reporting. And good/better performances (Australia, Sweden) are not in the news so they just slide on by.

  3. Gravatar of Morgan Warstler Morgan Warstler
    12. June 2012 at 07:01

    Scott, a question:

    If we began 5% NGDPLT today, with no make up. how much time does it take in your estimation until we’re above the LT routinely?

    Yes, at the start there might be some discombobulation, as everyone wrestled in the first month with credibility, etc.

    Do we quickly have a spike over 5%, and rates get raised, and everybody says HOLY SHIT the Fed is serious!

    And then the market crumbles for a second, because the top side of growth is now a known entity?

    But then we’re under 5% and the catch up action gets more and more aggressive, and then everyone says HOLY SHIT this is better than it used to be and they start making longer bets on this policy standing the test of time?

    And then after a couple years it is a firm belief?

    ——

    I’m trying to get this narrative down and understood as what you think happens WITH NO MAKEUP.

    Because I want to see the assumptions used to see where the economic recovery happens, where the change in market psychology becomes most clear.

  4. Gravatar of Major_Freedom Major_Freedom
    12. June 2012 at 07:10

    Adam Posen is in the unfortunate position of realizing that given sums of central bank inflation are having less and less of an effect on being able to prop up an unsustainable, distorted economy CAUSED by previous money printing.

    So Posen is now calling for central banks around the world to start buying private assets:

    http://www.telegraph.co.uk/finance/economics/9324565/Central-banks-should-buy-assets-other-than-government-bonds-says-Bank-of-Englands-Adam-Posen.html

    This is what happens with welcomed and worshiped communist institutions. And “market” (hahaha) monetarists are their torch bearers.

  5. Gravatar of dwb dwb
    12. June 2012 at 07:23

    morphine, jelly donuts, monetary cookies. It’s all the same bad Kool Aid,

  6. Gravatar of Major_Freedom Major_Freedom
    12. June 2012 at 07:40

    This chart needs no explanation.

  7. Gravatar of Major_Freedom Major_Freedom
    12. June 2012 at 07:52

    Morgan:

    If we began 5% NGDPLT today, with no make up. how much time does it take in your estimation until we’re above the LT routinely?

    Remember me asking this same question? Wasn’t it you that told me Sumner isn’t going to answer this question, for political purposes?

    He doesn’t want to admit that market monetarists have gotten what they wanted since 2010.

    NGDP growth has been chugging along nicely since 2010, but because the economy is still in the crapper, there is a need for an indeterminate escape clause, which is an unstated amount of time for “make up”. That way, if the economy continues to remain in the crapper for the next two years, the excuse can always be made: “Levels! We need more inflation now so that the looooooooooooooong term trend is 4-5% NGDPLT! We still haven’t made up for the 2008 loss!”

    It’s funny because as a joke I picture a market monetarist saying the loss of aggregate spending after the Civil War still hasn’t been “made up” for since, and that’s why we’re still stagnating in 2012.

    How far back are we supposed to go? What is the arbitrary and groundless number of years of back looking that is to accompany the arbitrary and groundless 4-5% NGDP growth?

    I can answer: It’s when the economy recovers. It’s always different for different ages, so we just have to pray for the best. Don’t worry, we’re not wrong about anything. Trust us.

  8. Gravatar of Tom Tom
    12. June 2012 at 09:12

    Here’s a free econ book that can be read. GREAT models / tales on p17 & 18.
    http://books.google.co.il/books/p/pub-8194589960919624?hl=en_GB&ie=UTF-8&oe=UTF-8&vid=9781906924775&q=OBPXX&redir_esc=y#v=onepage&q=OBPXX&f=false

    Models that don’t incorporate behavior influenced by wealth levels will fail to describe the differences between pre-2006 and post 2008 trends. But wealth feedback is pretty difficult to model, and seems excessively complex when its effects only are noticeable if there’s a large change.

  9. Gravatar of ssumner ssumner
    12. June 2012 at 09:21

    Lorenzo, Unfortunately that’s typical.

    Morgan, I don’t know, and I’m not sure why it matters.

  10. Gravatar of Don Geddis Don Geddis
    12. June 2012 at 09:48

    MF: “How far back are we supposed to go?”

    That’s pretty easy. It’s not a matter of absolute time. It’s a matter of the economy returning to full employment and maximum production. When you get a single year with 5-6% unemployment and 2-3% inflation — much as occurred basically every year from the 1980’s to the mid-2000’s — then you can say that the economy has “recovered”, and you can start level targeting from there.

    But we haven’t seen that yet since 2008. Since we haven’t yet had a healthy economy, it doesn’t make sense to try to maintain the economy in the current sick state.

  11. Gravatar of Jim Jim
    12. June 2012 at 11:44

    Google title for article:
    “Markets hungry for next monetary fix”

  12. Gravatar of Major_Freedom Major_Freedom
    12. June 2012 at 11:56

    Don Geddis:

    MF: “How far back are we supposed to go?”

    That’s pretty easy. It’s not a matter of absolute time. It’s a matter of the economy returning to full employment and maximum production.

    Hahaha, read the last sentence of my last post.

    My goodness, so my suspicion was correct. You guys really do believe that we should remain in the dumps forever if targeting NGDP forever fails to allow the economy to recover.

    NGDP targeting theory is non-falsifiable. If things don’t work out, just wait a little more! Trust us, it works!

    Wow.

    When you get a single year with 5-6% unemployment and 2-3% inflation “” much as occurred basically every year from the 1980’s to the mid-2000’s “” then you can say that the economy has “recovered”, and you can start level targeting from there.

    What if we don’t get 6% unemployment and 3% inflation? How long before you say NGDP has been falsified?

    But we haven’t seen that yet since 2008. Since we haven’t yet had a healthy economy, it doesn’t make sense to try to maintain the economy in the current sick state.

    Hahaha, so when the economy recovers, it means NGDP worked. If the economy does not recover, it means there wasn’t enough NGDP.

    You sound exactly like a Keynesian.

  13. Gravatar of Negation of Ideology Negation of Ideology
    12. June 2012 at 12:29

    Morgan –

    The question about what happens with no makeup depends on the average length of credit contracts. Imagine an economy where no one made long term contracts. No borrowing or lending, no wage contracts, supplier contracts, etc. And all prices renegotiated every day. You show up to your office in the morning and negotiate your pay for that day. In that imaginary economy, the adjustment period would be very short.

    In an advanced, complex economy such as ours, the adjustment period is likely to be much longer. I’d guess most mortgages were from before 2007, when NGDP expectations were higher. Other credit arrangements might be shorter. So you get into the problem where nominal contracts negotiated after 2009 were under one set of expectations, and those before 2007 were under another set. The two key questions we need to answer are:

    1. What percentage, by dollar value, of contracts were negotiated under each?

    2. What is the average duration by dollar value of all contracts in the economy?

    I seem to recall that Irving Fisher once proposed just splitting the difference and returning the price level (Sorry, I didn’t define it Scott, maybe Fisher did) half way between to what it was in 1929 and what it bottomed out at. We could do the same and return the expected NGDP level halfway back to trend. My preference would be to return the fraction based on the two questions I asked. Then set a new nominal expectation for people to rely on. It’s not as important whether we pick 5% or 3% as it is whether people can use it to make economic calculations in making contracts.

  14. Gravatar of Major_Freedom Major_Freedom
    12. June 2012 at 13:22

    Propagation of Ideology:

    The question about what happens with no makeup depends on the average length of credit contracts.

    New credit contracts are created every day. They all have different maturity dates. Every minute of every day, new credit contracts are being made, and old contracts are being settled. There is no one single time frame that can be expressed in years that can encompass all the myriad of credit contracts that extend prior to and beyond the given time period.

    It’s telling how you are relegated to arbitrarily choosing some average lifespan of existing credit contracts, as if the overwhelming majority of credit contracts being something other than the average time period you think of, are non-existent.

    In an advanced, complex economy such as ours, the adjustment period is likely to be much longer. I’d guess most mortgages were from before 2007, when NGDP expectations were higher. Other credit arrangements might be shorter. So you get into the problem where nominal contracts negotiated after 2009 were under one set of expectations, and those before 2007 were under another set.

    There is no such thing as a single set of expectations, and mortgage lenders and borrowers do not include NGDP expectations when deciding on prices, maturities, and interest rates.

    Each individual has their own expectations for the prices and demands that concern their own affairs. Nobody, with the exception of market monetarists and other dilettantes, care a lick about NGDP. It is not an object of action. Nobody can economize NGDP, buy NGDP, or sell NGDP.

    The two key questions we need to answer are:

    1. What percentage, by dollar value, of contracts were negotiated under each?

    2. What is the average duration by dollar value of all contracts in the economy?

    Suppose you had the answers to this question. Then what?

    Then set a new nominal expectation for people to rely on.

    Nobody “relies” on NGDP.

  15. Gravatar of Don Geddis Don Geddis
    12. June 2012 at 14:05

    MF: “So when the economy recovers, it means NGDP worked.”

    How can you read so many of Sumner’s posts, for so long, and still not have the most basic conception of how the idea works?

    No Market Monetarist thinks that you can take an economy in depression (due to AD shock), and then at the bottom start mere 5% NGDP growth, and that will somehow get the economy out of depression (short of many, many painful years of adjustment).

    If the economy were ALREADY healthy, then 5% LT average growth would KEEP it healthy. But 5% is not sufficient to cure an economy suffering from an AD shock (in any timely fashion).

    “So when the economy recovers, it means NGDP worked.”

    Of course not, because the current economy is not experiencing NGDPLT, so nothing about what happens has any effect at all on the truth or falsity of that proposal. (And whether the actual NGDP growth of the last couple of years happens to be 5% or not, is NOT the same as the Fed committing to ensure that it always will be 5%. Surely you’ve seen the word “expectations” in a few of Sumner’s posts?)

    Really, there’s stuff you could legitimately criticize about the NGDPLT proposal. But at least try to understand it first, before you just spout off, complaining about a strawman that nobody else is talking about.

  16. Gravatar of Negation of Ideology Negation of Ideology
    12. June 2012 at 16:20

    Major –

    That post was even more bizarre than your usual posts.

    “There is no one single time frame that can be expressed in years that can encompass all the myriad of credit contracts that extend prior to and beyond the given time period.”

    Exactly what I said. That’s why you use an average.

    “It’s telling how you are relegated to arbitrarily choosing some average lifespan of existing credit contracts, as if the overwhelming majority of credit contracts being something other than the average time period you think of, are non-existent.”

    Yes, that’s what an average is. Almost everything is different than the average. Very few people have exactly the average income, height or weight. And what does “the average time period you think of” mean? You don’t think of an average, you calculate it. And how can an average be arbitrary?

    “mortgage lenders and borrowers do not include NGDP expectations when deciding on prices, maturities, and interest rates.”

    Fascinating. So if my mortgage company expected NGDP to drop by 90% they would have lent me the same amount of money as they did? That surprises me. I would think lending decisions would have something to do with expected future income.

    “Suppose you had the answers to this question. Then what?”

    Use the average. Like I specifically said. How can you tell me what I want to do is arbitrary and then ask me what I want to do?

    I’m used to a healthy dose of buffoonery from you, but this one really takes the cake.

  17. Gravatar of Mike Sax Mike Sax
    12. June 2012 at 16:37

    “I’m used to a healthy dose of buffoonery from you, but this one really takes the cake.”

    Negation bear in mind that this is a guy who literalloy thinks that democracy is “paratism”.

    He would free us from inflation and suffrage in one fell swoop.

    This is why I talk to the Major mostly for a good laugh.

  18. Gravatar of dwb dwb
    12. June 2012 at 16:58

    “mortgage lenders and borrowers do not include NGDP expectations when deciding on prices, maturities, and interest rates”

    false:
    lenders score consumers on a variety of statistics, those models and scores include things like FICO score and income, but behind the scenes they also include forward curves (i.e. treasury and credit spreads) and also either implicitly or explicitly, assumptions about home price appreciation and/or unemployment.

  19. Gravatar of ssumner ssumner
    12. June 2012 at 17:39

    Everyone, Thanks for answering MF for me. I answered all his questions in the past, but it just went in one ear and out the other, he asks the same questions over and over. So I’ve given up.

  20. Gravatar of Don Geddis Don Geddis
    12. June 2012 at 21:09

    Prof Sumner: “Thanks for answering…”

    See, I was wondering whether you were trying to lead by example. I.e., “Don’t feed the trolls.” And here we were offering attention to someone who obviously is here only for personal propaganda.

    But if it doesn’t actually bother you to have him even further sidetrack your blog comments … well, sometimes it’s fun to poke the bear with a sharp stick, just to entertain us as it rears up and roars.

  21. Gravatar of Negation of Ideology Negation of Ideology
    13. June 2012 at 05:55

    Mike –

    Good point. Perhaps my comment was unduly harsh. I’m sure the Major has had many posts that were far more buffoonish than this one.

  22. Gravatar of Eric Morey Eric Morey
    13. June 2012 at 06:04

    MF- “There is no one single time frame that can be expressed in years that can encompass all the myriad of credit contracts that extend prior to and beyond the given time period.”

    See: Duration (https://en.wikipedia.org/wiki/Duration_%28finance%29)

  23. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 06:20

    Eric Morey:

    Duration is something a little different. It concerns an individual’s weighted average cash flow of a bond. It doesn’t concern “an economy’s” weighted average cash flow of all bonds.

    You can’t select a time period, say 2015 to 2022, and successfully encompass all existing credit contracts that extend prior to, and subsequent to, that time period.

  24. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 07:11

    Don Geddis:

    MF: “So when the economy recovers, it means NGDP worked.”

    No Market Monetarist thinks that you can take an economy in depression (due to AD shock), and then at the bottom start mere 5% NGDP growth, and that will somehow get the economy out of depression (short of many, many painful years of adjustment).

    I didn’t say start 5% NGDP growth. If you want, you can start with 5% NGDP LEVEL growth. My point has more to do with the clear lack of falsification. If NGDPLT is followed by recovery, then NGDPLT worked. If NGDPLT is not followed by recovery, then NGDPLT still works, it just needs a longer time for it to work.

    You say I am not getting NGDP yet? On the contrary, it is you that doesn’t get it because you’re not even addressing the points I am making about it.

    If the economy were ALREADY healthy, then 5% LT average growth would KEEP it healthy. But 5% is not sufficient to cure an economy suffering from an AD shock (in any timely fashion).

    See that? “In any timely fashion.” THAT is the escape clause you need to excuse the LACK of recovery, because you’re convinced NGDPLT “works” a priori.

    “So when the economy recovers, it means NGDP worked.”

    Of course not, because the current economy is not experiencing NGDPLT, so nothing about what happens has any effect at all on the truth or falsity of that proposal.

    That is false. For the last two years the economy HAS been experiencing NGDPLT. I have challenged market monetarists to tell me just how long 5% rate targeting has to take place before it “evolves” into 5% LT. None have answered.

    If you say 2 years is not enough to turn 5% RT into 5% LT, then I ask you again for the millionth time: HOW LONG IS THE TIME PERIOD? This is why I jokingly answered the question for you, by saying “It’s probably when the economy recovers. That is when the heretofore 5% rate targeting turns into 5% level targeting.”

    Can’t you see the problem with this? Sumner is claiming he has answered these questions many times, but in truth he has not. He has dodged them just like you acolytes are dodging them.

    You’re trying to put words into my mouth because you can’t answer my questions. You can’t answer the question that I am asking, so you have to presume I am making arguments and asking questions that I am not in fact making and asking, so that you can answer those instead.

    So let me ask this again, for the millionth and one time:

    GIVEN that we currently have 4-5% NGDP growth, since 2010, HOW LONG of a time must pass before that 5% rate growth can be assumed to be 5% level growth? Should we wait 100 years before you’ll say “OK, yes, we’ve had 5% LT”? It’s already been two years, and my conviction is that 2 years is quite a long time for a market economy to adjust to a new monetary condition.

    If you say more than 2 years is needed, then I ask you: is it because you have some sort of falsifiable theory that predicts more than 2 years is necessary, or is it really because the economy hasn’t yet fully healed, in which case you would have to be open the possibility (I know this is hard for you people) that maybe, perhaps, the 4-5% NGDP rate targeting since 2010 is HAMPERING recovery?

    You just asserted that in a healthy economy, 5% LT will “keep it healthy”. But that requires one to a priori accept that indefinite monetary inflation that results a constant spending growth doesn’t harm economies!

    (And whether the actual NGDP growth of the last couple of years happens to be 5% or not, is NOT the same as the Fed committing to ensure that it always will be 5%. Surely you’ve seen the word “expectations” in a few of Sumner’s posts?)

    You’re ignoring the fact that 5% NGDP with expectations, and 5% NGDP without expectations, should have the exact same effect on the economy, because it’s the 5% NGDP itself that is supposed to bring the gains/stability. You can’t tell me that the economy isn’t really recovering because investors and entrepreneurs don’t think the current 4-5% NGDP is going to last. For if investors don’t think it’s going to last, then who cares? NGDP is still growing at 4-5% like you wanted! You aren’t seriously suggesting that 4-5% NGDP growth won’t work if investors have a certain disposition regarding that 4-5% NGDP, do you? If you do, then congrats, you just admitted the futility of NGDP targeting. You’d be admitting that 5% NGDP targeting won’t work on the sole basis that investors think in a certain way. You would be saying 5% NGDP isn’t really a policy of growth and stability, but rather that we need to target investor mindsets instead.

    Surely you’ve seen that the Fed committing to 2% consumer price inflation doesn’t stop investors from making huge mistakes. Investor “minds” can be different from what is necessary for 2% price inflation to work.

    Are you saying successfully targeting 5% NGDP growth can fail, if investors have mindsets that are not what you expected them to be with 5% NGDP growth targeting?

    This is where you find that aggregates aren’t the primary driver for the economy, and that it is individual entrepreneurs and investors that are the primary driver.

    Really, there’s stuff you could legitimately criticize about the NGDPLT proposal. But at least try to understand it first, before you just spout off, complaining about a strawman that nobody else is talking about.

    Oh please. You’re out of your league. You are not even answering my questions. You’re dodging them and attacking me instead. It’s obvious.

    Propagation of Ideology:

    “There is no one single time frame that can be expressed in years that can encompass all the myriad of credit contracts that extend prior to and beyond the given time period.”

    Exactly what I said. That’s why you use an average.

    The average of what? The average of “all the myriad of credit contracts that extend prior to and beyond the given time period”! You aren’t encompassing them all by thinking of an abstract average calculation.

    “It’s telling how you are relegated to arbitrarily choosing some average lifespan of existing credit contracts, as if the overwhelming majority of credit contracts being something other than the average time period you think of, are non-existent.”

    Yes, that’s what an average is. Almost everything is different than the average. Very few people have exactly the average income, height or weight. And what does “the average time period you think of” mean? You don’t think of an average, you calculate it. And how can an average be arbitrary?

    It’s arbitrary precisely because it is a single number that doesn’t describe virtually the entire sample. Do you honestly believe that just because you can calculate an average, that it has any bearing on the reality of the individual credit contracts?

    “mortgage lenders and borrowers do not include NGDP expectations when deciding on prices, maturities, and interest rates.”

    Fascinating. So if my mortgage company expected NGDP to drop by 90% they would have lent me the same amount of money as they did?

    No, if they expected THEIR OWN revenues to drop by 90%, then they would have thought twice about lending to you the way they did. If they expect their own revenues to rise by 5%, say, then NGDP is irrelevant.

    That surprises me. I would think lending decisions would have something to do with expected future income.

    WHOSE income? THEIR OWN income! Not the income of the economy. Not the total income of potato farmers and computer manufacturers and everyone else. THEIR OWN.

    Have you ever run a business? I have. So have many in my family. I can tell you that neither we, nor any of our business partners, economized NGDP. We don’t care if spending drops on one side of the country. We only care if OUR income drops.

    NGDP can rise, fall, or stay the same, and it won’t mean a lick of difference to the individual business’ revenues. My revenues can go down even if NGDP goes up. My revenues can go up even if NGDP goes down.

    The reason why it “surprises you” is because you don’t understand business activity. You only understand idealistic conceptions of NGDP, and you pretend that it is as important to everyone else as it is in your dilettantish world of scribbling on paper.

    “Suppose you had the answers to this question. Then what?”

    Use the average.

    Then what? What is going to happen to virtually the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?

    Your thinking is so crude.

    How can you tell me what I want to do is arbitrary and then ask me what I want to do?

    I said calculating the average is arbitrary. What you want to do with that arbitrary number is something else.

    I’m used to a healthy dose of buffoonery from you, but this one really takes the cake.

    You sound mad.

    Mike Sax:

    Negation bear in mind that this is a guy who literalloy thinks that democracy is “paratism”.

    Mike, if you want to criticize me, fine, but at least learn how to spell. That sentence was just a disaster.

    And democracy is parasitism. Democracy sanctions 51% of the people “voting” to extract wealth from the remaining 49%. Nobody’s property rights are safe in democracy. They can be, and are, voted away. This is why democracy is parasitism.

    He would free us from inflation and suffrage in one fell swoop.

    It would free the host from the parasites, yes. Yes, you as a parasite might feel tremendous hardships. But then again, so did the slave owners after slave emancipation.

    This is why I talk to the Major mostly for a good laugh.

    I’m flattered I amuse you like a physicist amuses a drunk.

    dwb:

    “mortgage lenders and borrowers do not include NGDP expectations when deciding on prices, maturities, and interest rates”

    My, that statement has made you market monetarists have a conniption, hasn’t it?

    false:

    No, it’s true. 90% of businessmen don’t even know what NGDP is.

    lenders score consumers on a variety of statistics, those models and scores include things like FICO score and income, but behind the scenes they also include forward curves (i.e. treasury and credit spreads) and also either implicitly or explicitly, assumptions about home price appreciation and/or unemployment.

    None of these are NGDP. Notice how you had to sneak in “implicitly”, to rescue your belief people care about NGDP. I could just as well argue that Warren Buffet “implicitly” worries about uncertain events such as alien invasions, because he holds a positive sum of cash.

    ssumner:

    Everyone, Thanks for answering MF for me. I answered all his questions in the past, but it just went in one ear and out the other, he asks the same questions over and over. So I’ve given up.

    You’re being dishonest. You have not answered these questions in the past. You have fallen over yourself trying to answer them, but your answers are simply not good enough. They don’t address the problems I am addressing.

    The fact that you have sanctioned the garbage answers given above, shows that you are either as empty headed as they are, or you are more concerned with appearances and of teaming up with others who want the same thing as you, than you are with finding truth.

    All of you are weak minded. You can’t even defend your silly worldview with even the smallest of criticisms. You answer questions I didn’t ask, you assume I am making arguments I didn’t make, and you fail to seriously address NGDP. You remain superficial and antagonistic.

    If this blog is not able to answer even the smallest of questions satisfactorily, then consider yourselves dogmatists.

  25. Gravatar of ssumner ssumner
    13. June 2012 at 08:08

    Don, I agree.

  26. Gravatar of dwb dwb
    13. June 2012 at 08:30

    No, it’s true. 90% of businessmen don’t even know what NGDP is.

    really? i assume that you have absolutely no evidence to back this up.

    seeing as how its included in econ courses as part of MBA programs… i am nearly 100% certain you are wrong. Anyway, i wonder why we keep asking them about their “expectations” if they don’t care about them…

    http://www.nfib.com/Portals/0/PDF/sbet/sbet201206.pdf

  27. Gravatar of Negation of Ideology Negation of Ideology
    13. June 2012 at 08:31

    Major –

    “No, if they expected THEIR OWN revenues to drop by 90%, then they would have thought twice about lending to you the way they did.”

    False. They don’t base their lending decisions to me on their expected revenues, they base it on their expectation of my revenues. That, and their expected value of the collateral.

    “My revenues can go up even if NGDP goes down.”

    Of course. But the average person’s revenues cannot go up if NGDP goes down. If NGDP drops by 90% below expectations, by definition the average person’s revenues are going to drop (unless population also drops by 90%). This is not Lake Wobegon, everyone cannot be above average.

    “Then what? What is going to happen to virtually the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    Nice try, but that is true no matter what the value of the dollar is. So the same thing will happen in any case. The advantage of an average is it is by definition the closest. The current approach, having the dollar valued higher (as a share of GDP) than expected at the time of most contracts is by definition further from the expectation than the average would be for the most contracts.

    And no, I’m not mad, I’m an unusually happy person. I actually think you are hilarious. Is it intentional?

  28. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 08:43

    dwb:

    No, it’s true. 90% of businessmen don’t even know what NGDP is.

    really? i assume that you have absolutely no evidence to back this up.

    seeing as how its included in econ courses as part of MBA programs… i am nearly 100% certain you are wrong.

    So you have no idea. One, I have an MBA from a 2nd tier university, and I did not learn about NGDP at all. It was never taught. Two, 90% of businessmen aren’t 100% MBAs. Three, even if NGDP was taught, it doesn’t mean MBA graduates who learn it, actually use it in their business affairs. Most of the stuff I learned was useless for actual business activity. It’s why the profs were teaching rather than making millions in the market.

    Anyway, i wonder why we keep asking them about their “expectations” if they don’t care about them…

    They don’t care about NGDP. How hard is this to grasp?

    You ask any businessman, and you ask them whether or not they integrate NGDP into their forecasting. They’ll look at you and most will say “Huh? NGDP? What’s that?”

    You’re stuck in assumption land. You can only say “It’s taught in school!” as if that means it is actually used by the majority of businessmen. Entrepreneurship cannot be taught in school. You either have it or you don’t.

    The last time entrepreneurs trusted PhD types, they brought them fallacy ridden MBS security pricing formulae that blew up in their faces. There is a government financed general glut of academic types running amok in society.

  29. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 08:51

    Propagation of Ideology:

    “No, if they expected THEIR OWN revenues to drop by 90%, then they would have thought twice about lending to you the way they did.”

    False.

    No, it’s true. Their expected revenues is a function of your expected payments, and the expected payments of their customers. Not NGDP.

    “My revenues can go up even if NGDP goes down.”

    Of course. But the average person’s revenues cannot go up if NGDP goes down.

    The average person doesn’t exist.

    Maybe if you considered who actually exists, rather than what you can scribble on paper, you’d know that businesses don’t deal with “the average person”, they deal with their own specific individual customers.

    If NGDP drops by 90% below expectations, by definition the average person’s revenues are going to drop (unless population also drops by 90%). This is not Lake Wobegon, everyone cannot be above average.

    No company does business with a non-existent person.

    “Then what? What is going to happen to virtually the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    Nice try, but that is true no matter what the value of the dollar is.

    What is true? I didn’t say anything. I just asked you two questions. Are you really that unsure of your own convictions that you are even afraid of answering these simple questions?

    I am not calling for money devaluation based on calculating some average. You are. You can’t tell me “That’s always true” as if I am calling for the same thing you are. I mean come on.

    So the same thing will happen in any case.

    What same thing?

    The advantage of an average is it is by definition the closest.

    Closest to what? If someone has an outstanding credit contract that matures in 10 years, and you calculate an average of 3 years, how is what you are calling for going to help this person? Screw them right?

    The only party that can be benefited by what you are calling for are the “average of society”, meaning the government. Only the government has any need for the stuff you’re peddling.

    The current approach, having the dollar valued higher (as a share of GDP) than expected at the time of most contracts is by definition further from the expectation than the average would be for the most contracts.

    So screw those who otherwise would have guessed right, but are now getting it good and hard for not predicting in line with the ad hoc, on the seat of your pants central planning program you’re calling for in 2012? Who are you again?

    And no, I’m not mad, I’m an unusually happy person. I actually think you are hilarious. Is it intentional?

    Yeah, you’re mad.

  30. Gravatar of Saturos Saturos
    13. June 2012 at 09:09

    MF, you said,

    “”Next monetary fix” conveys the impression that the central banks are drug dealers, and the markets are dependent addicts. This leads to the impression that the solution is for the drug dealer to stop dealing drugs, or even for the central bank to get out of the market.”

    So you agree that markets are like addicts, unable to say no to drugs (resource misallocation when new money is injected)?

  31. Gravatar of Negation of Ideology Negation of Ideology
    13. June 2012 at 09:40

    Major –

    I don’t have time to respond to your entire post now, but to clarify – my words “that is true no matter what the value of the dollar is.” refer to your words:

    “the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    It is true that the entire population of contracts is not going to be equal to the average, or equal to anything else that could possibly occur.

    And, “So the same thing will happen in any case.” refers to your question “What is going to happen to virtually the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    Since the entire population of contracts is not going to be equal to whatever happens, the same thing will happen to the contracts in any case.

    Your premise is true in any and all cases and policy options, so it’s not really relevant to what policy you follow.

  32. Gravatar of dwb dwb
    13. June 2012 at 09:43

    They’ll look at you and most will say “Huh? NGDP? What’s that?”

    well, that’s because that’s not how i would actually ask it. Just because i don’t know how to say bathroom in German does not mean i cannot find it in Munich, and just because i do not know the technical term for the thing that connects the steering wheel to the wheels to steer the car does not mean i don’t know how to drive. Pretty sure people know how to do a sales forecast, a business plan, and how “economic growth” impacts the forecast and borrowing rates.

    dont assume other people are as dumb or as dense as you, or slept through their education.

  33. Gravatar of Mike Sax Mike Sax
    13. June 2012 at 10:04

    “I’m flattered I amuse you like a physicist amuses a drunk.”

    Yes you amuse me very much Major though unintentionally and not quite in that way. Certainly I don’t laugh at you because of what a good physicist you are-rather the opposite. If it goes right over your head-all the better, and clearly it does.

    “It would free the host from the parasites, yes. Yes, you as a parasite might feel tremendous hardships. But then again, so did the slave owners after slave emancipation.”

    Yes, let’s end democracy and voting rights so as to free the slaves. Rather than amusing me because of what a fine physicist you are you amuse me because you get things ass backwards.

    When Lincoln-a guy you quite possibly think the antichrist-freed the slaves one of the first things he did was give them the right to vote.

    Your freeing of the slaves means taking away the right to vote-which suggests freeing the slaves is not your goal but rather to enslave the free.

    I would imagine you’re not a Lincoln fan correct me if I’m wrong.

    Further I imagine you’re a guy who still as “doubts” whether or not the President was actually born here right-you still think it’s all a conspriacy to hide the fact he was born in Kenya?

    Again I’m inferring but I was right when I inferred you are a proper follower of Herman Hoppe.

  34. Gravatar of dwb dwb
    13. June 2012 at 10:21

    I have an MBA from a 2nd tier university, and I did not learn about NGDP at all

    and incidentally, out of curiosity, i checked the syllabus of two “core” business management classes at MBA programs I am pretty familiar with that cover the economic environment, determinants of prices, interest rates, and exchange rates.

    Mankiw’s Macroeconomics Text and Gordon’s Macroeconomic text are used. The first topic for the class is “Introduction, Measurement of National Income, Unemployment”

    “nominal GDP” is on page 23 of Mankiw’s text, i didn’t even have to get far.

    lies, damn lies, and MF posts.

  35. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 10:53

    and incidentally, out of curiosity, i checked the syllabus of two “core” business management classes at MBA programs I am pretty familiar with that cover the economic environment, determinants of prices, interest rates, and exchange rates.

    Mankiw’s Macroeconomics Text and Gordon’s Macroeconomic text are used. The first topic for the class is “Introduction, Measurement of National Income, Unemployment”

    “nominal GDP” is on page 23 of Mankiw’s text, i didn’t even have to get far.

    You’re still not getting it. The fact that NGDP is in Mankiw’s textbook does not mean that businessmen around the country utilize it. You do know the difference between knowing a path, and walking the correct path, don’t you?

    You can show me 100 textbooks that contain a blurb on NGDP. It won’t prove your rebuttal against my argument.

    lies, damn lies, and MF posts.

    Where did I lie? Lies imply purposeful deceit.

    I said I wasn’t taught NGDP. I was taught GDP, and GDP corrected for inflation. I guess you could argue GDP is NGDP, but I was taught it was representative of output, not dollar spending. I was not taught how such a thing is integrated into microeconomics, let alone business planning.

    Showing me textbook blurbs on NGDP is not in any way proof that entrepreneurs utilize NGDP in their forecasts. I would thought that you as a seeming student at some point in time, knows how little one learns in school is actually utilized in the real world, ESPECIALLY in business.

  36. Gravatar of dwb dwb
    13. June 2012 at 11:10

    I was taught GDP, and GDP corrected for inflation. I guess you could argue GDP is NGDP

    lol. you have to be the worst liar, ever.

  37. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 11:13

    Saturos:

    “”Next monetary fix” conveys the impression that the central banks are drug dealers, and the markets are dependent addicts. This leads to the impression that the solution is for the drug dealer to stop dealing drugs, or even for the central bank to get out of the market.”

    So you agree that markets are like addicts, unable to say no to drugs (resource misallocation when new money is injected)?

    Yes. Market participants who seek to earn profits do not say no to money. I thought that was obvious.

    Negation of Ideology:

    I don’t have time to respond to your entire post now, but to clarify – my words “that is true no matter what the value of the dollar is.” refer to your words:

    “the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    But that is ALSO a question, not a statement. Wow, you certainly have a knack for avoiding uncomfortable questions, don’t you?

    It is true that the entire population of contracts is not going to be equal to the average, or equal to anything else that could possibly occur.

    Then what is the purpose of calculating the average, and what good will it do for the many credit contract owners whose contracts are not that average?

    It’s OK, you can say “nothing”. I won’t get mad.

    And, “So the same thing will happen in any case.” refers to your question “What is going to happen to virtually the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    How can that question be the basis for you saying the same thing will happen as what I said? I didn’t say anything happens. I asked a question.

    Again, evasion evasion evasion.

    Since the entire population of contracts is not going to be equal to whatever happens, the same thing will happen to the contracts in any case.

    What will happen in any case?

    Your premise is true in any and all cases and policy options, so it’s not really relevant to what policy you follow.

    What premise? Goodness man, like are we even talking here, or are you talking to someone else?

    dwb:

    They’ll look at you and most will say “Huh? NGDP? What’s that?”

    well, that’s because that’s not how i would actually ask it. Just because i don’t know how to say bathroom in German does not mean i cannot find it in Munich, and just because i do not know the technical term for the thing that connects the steering wheel to the wheels to steer the car does not mean i don’t know how to drive. Pretty sure people know how to do a sales forecast, a business plan, and how “economic growth” impacts the forecast and borrowing rates.

    Economic growth is not the same thing as NGDP. Wow dude.

    dont assume other people are as dumb or as dense as you, or slept through their education.

    Don’t assume other people know what you know. That’s the wiser position to take.

    Mike Sax:

    “I’m flattered I amuse you like a physicist amuses a drunk.”

    Yes you amuse me very much Major though unintentionally and not quite in that way.

    Yes, drunks also laugh at people who didn’t intentionally try to make them laugh.

    Certainly I don’t laugh at you because of what a good physicist you are-rather the opposite.

    Really? You laugh at me because I am a bad physicist? Speaking of unintentional hilarity…

    If it goes right over your head-all the better, and clearly it does.

    Ah yes, the typical “if you don’t get it, then I’m not going to tell you” empty defense.

    “It would free the host from the parasites, yes. Yes, you as a parasite might feel tremendous hardships. But then again, so did the slave owners after slave emancipation.”

    Yes, let’s end democracy and voting rights so as to free the slaves.

    Since when did the majority have a right to loot the minority? That right doesn’t exist.

    Yes, let’s end democracy so that the enslaved minority can live their own lives and not be exploited by lazy bullies who consider being in the majority means being in the right.

    Rather than amusing me because of what a fine physicist you are you amuse me because you get things ass backwards.

    No U.

    When Lincoln-a guy you quite possibly think the antichrist-freed the slaves one of the first things he did was give them the right to vote.

    Was that before or after he brought about the deaths of 600,000 people? Probably after, because you liberals love killing in the name of the collective.

    Your freeing of the slaves means taking away the right to vote-which suggests freeing the slaves is not your goal but rather to enslave the free.

    If by “the free” you mean “those who enslave the minority”, and if by “enslave” you mean “cease enslaving the minority so that the minority can be freed”, then yes, I do want to “enslave” (as you define it) “the free” (as you define it).

    I would imagine you’re not a Lincoln fan correct me if I’m wrong.

    Why am I not surprised you’re a Lincoln cultist. You’re so predictable.

    “If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone I would also do that. What I do about slavery, and the colored race, I do because I believe it helps to save the Union; and what I forbear, I forbear because I do not believe it would help to save the Union.” – Abraham Lincoln, “Slave lover”, in a letter to Horace Greeley.

    Lincoln didn’t care a lick about the slaves. He only cared about destroying secession, i.e. destroying people who wanted the right to self-determination and out of the Union.

    But yeah, let me laugh at you some more as you predictably get closer and closer to painting me as racist and pro-slavery.

    That will bring this debate to new heights.

    Individual property rights is not slavery, and is in fact slavery abolishing.

    Repeat that over and over again until it sinks in.

    Further I imagine you’re a guy who still as “doubts” whether or not the President was actually born here right-you still think it’s all a conspriacy to hide the fact he was born in Kenya?

    I bet you believe reptilians control the White House. Oh my god! Now it makes sense!

    Again I’m inferring but I was right when I inferred you are a proper follower of Herman Hoppe.

    I am not a follower of Hoppe. I specifically said I agree with him about some things, and disagree with him about other things. How in the world does that make me a “follower”? If Hitler said 2+2=4, and you agreed with him, would that make you a follower of Hitler?

    You’re just a walking disaster, aren’t you?

  38. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 11:17

    dwb:

    I was taught GDP, and GDP corrected for inflation. I guess you could argue GDP is NGDP

    lol. you have to be the worst liar, ever.

    So wait, first I lied about not having been taught NGDP, now I am lying about having been taught GDP?

    Nice to see you completely derailed this, as expected, from whether or not NGDP is utilized by businessmen, to whether or not I was lying about being taught NGDP.

    I can assure you, I was not taught NGDP. I was not taught market monetarism. I was not taught any of this stuff, which is one of the reasons why I am here on this blog trying to learn it. I don’t go on Keynesian blogs because I was taught that.

    What’s your beef? Tell me what your real problem is. Go ahead, I can take it. Let me have it. Use me to satisfy your conflicts.

  39. Gravatar of Don Geddis Don Geddis
    13. June 2012 at 11:20

    MF: “My point has more to do with the clear lack of falsification. If NGDPLT is followed by recovery, then NGDPLT worked.

    Believe it or not, the claim is even stronger: if we were in an NGDPLT regime, we never would have had a (demand-side) recession in the first place. “Recovery” is instant.

    If NGDPLT is not followed by recovery, then NGDPLT still works, it just needs a longer time for it to work.

    Nope, that’s not a MM claim. They are not asking for “more time”. Principally because, the central bank is not doing NGDPLT at the moment.

    See that? “In any timely fashion.” THAT is the escape clause you need to excuse the LACK of recovery

    You’re again mistaken, because nobody is doing NGDPLT. That’s the part you seem to constantly fail to understand. No such experiment is currently happening right now.

    For the last two years the economy HAS been experiencing NGDPLT.

    That’s objectively false. Bernanke, who runs the US Fed, would certainly not agree that he is making decisions in order to control a level of NGDP. I’m not sure where you’re confused: perhaps you don’t understand what NGDPLT actually means; or perhaps you’re confused about what has been happening in the economy in the last few years.

    But the one thing that’s clear is that NOBODY — either the MMs who favor the policy, or the other economists who oppose it — think that NGDPLT has been happening for the last few years. You’re the only one who has made that claim.

    I have challenged market monetarists to tell me just how long 5% rate targeting has to take place before it “evolves” into 5% LT. None have answered.

    A simple question, with an easy answer: Never. A coincidental growth rate is simply a different thing from a level target commitment. It’s not a matter of “how much time”. They are different things. No matter how much you get of the first thing, it never turns into the second thing.

    If you say 2 years is not enough to turn 5% RT into 5% LT, then I ask you again for the millionth time: HOW LONG IS THE TIME PERIOD?

    Never.

    Is that enough for you to realize that you have a fundamental misunderstanding of the idea?

    So let me ask this again, for the millionth and one time:
    GIVEN that we currently have 4-5% NGDP growth, since 2010, HOW LONG of a time must pass before that 5% rate growth can be assumed to be 5% level growth?

    Never.

    Should we wait 100 years before you’ll say “OK, yes, we’ve had 5% LT”?

    I would never say that, because it isn’t true.

    If you say more than 2 years is needed

    I would say that NGDPLT is needed, which so far has been tried for zero years.

    You just asserted that in a healthy economy, 5% LT will “keep it healthy”. But that requires one to a priori accept that indefinite monetary inflation that results a constant spending growth doesn’t harm economies!

    No, it’s not an assumption. It’s an assertion, or conclusion, backed by careful examination of the historical economic data. (In particular, the incredible performance of the US economy from ~1980-2005.)

    No one is requiring you to accept it a priori. Your error is your refusal to accept is a posteriori.

    You’re ignoring the fact that 5% NGDP with expectations, and 5% NGDP without expectations, should have the exact same effect on the economy, because it’s the 5% NGDP itself that is supposed to bring the gains/stability.

    You again seem to have learned nothing from the hundreds of Sumner blog posts on this subject. Expectations are critical, and your dismissal of them shows that you don’t even understand the basic theory.

    Now, it is possible to understand the theory, and still disagree with it intelligently. But right now you’re arguing against a theory that even the MMs are not proposing. You’re making up your own strawmen ideas, and then criticizing them.

    If you want to comment constructively, the first thing you need to do is to understand what the other guy is saying. You haven’t yet demonstrated that you understand the NGDPLT proposal, so all your attempted criticisms are just irrelevant.

    You can’t tell me that the economy isn’t really recovering because investors and entrepreneurs don’t think the current 4-5% NGDP is going to last.

    Yes. That’s exactly what MMs are saying. (Plus, you’re leaving out the damaged caused by the huge plunge in NGDP in 2008.)

    You aren’t seriously suggesting that 4-5% NGDP growth won’t work if investors have a certain disposition regarding that 4-5% NGDP, do you?

    Yes.

    Are you saying successfully targeting 5% NGDP growth can fail, if investors have mindsets that are not what you expected them to be with 5% NGDP growth targeting?

    Yes. It seems that you need to learn the basics about expectations. Do you understand the Chuck Norris effect?

  40. Gravatar of dwb dwb
    13. June 2012 at 11:45

    Nice to see you completely derailed this, as expected, from whether or not NGDP is utilized by businessmen

    maybe you’re just not high enough on the food chain. check those presentations that go to your CFO. See if they have GDP and inflation expectations in them. next time you are in a meeting with them, ask how your company uses them.

  41. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 12:27

    Don Geddis:

    MF: “My point has more to do with the clear lack of falsification. If NGDPLT is followed by recovery, then NGDPLT worked.”

    Believe it or not, the claim is even stronger: if we were in an NGDPLT regime, we never would have had a (demand-side) recession in the first place. “Recovery” is instant.

    So recovery has nothing to do with employment or output, or anything economists study, but simply NGDP is back up?

    This goes way back to my initial impression of NGDP targeting. I guess my initial impression was correct.

    What about if output and employment are not recovering? How long will time have to pass before you say maybe NGDP targeting itself is preventing recovery?

    “If NGDPLT is not followed by recovery, then NGDPLT still works, it just needs a longer time for it to work.”

    Nope, that’s not a MM claim. They are not asking for “more time”. Principally because, the central bank is not doing NGDPLT at the moment.

    If NGDP growth has been 4-5% since 2010, then that is NGDP de facto targeting. My question is how long before this become level targeting. That’s it. That’s my single question that NOBODY here is answering. One person answered it by repeating my joke answer, which was “when the economy recovers.” I mean come on Mr. Geddis, I hope you can understand why I am not buying this stuff. It’s so sloppy and muddle-headed.

    NGDP should have the same effect whether it is intentional or not. Dollar bills don’t carry any “this was intentionally printed to target NGDP” and “this was not intentionally printed to target NGDP” pulsating information content in them as they are exchanged. It’s the dollar bills and the spending itself that is supposed to be decisive. It shouldn’t matter if it was intentional or not. After all, market monetarists have been claiming that the NGDP growth in Australia is the cat’s meow, and they aren’t even sure it’s intentional, but they’re claiming vindication anyway.

    You guys can’t have it both ways. You can’t say that the de facto NGDP targeting in Australia is doing wonders, and could very well be unintentional, but then turn around and say that the de facto NGDP targeting in the US since 2010, is somehow not working because the Fed hasn’t made it “official” yet.

    “See that? “In any timely fashion.” THAT is the escape clause you need to excuse the LACK of recovery”

    You’re again mistaken, because nobody is doing NGDPLT. That’s the part you seem to constantly fail to understand. No such experiment is currently happening right now.

    That’s false. The US has had de facto NGDP targeting since 2010. Australia has had de facto NGDP targeting for probably the last 20 years. You’re claiming Australia vindicates NGDP theory, and now you’re saying nobody is doing NGDP when the context is the US?

    The data doesn’t lie. If you say it’s not “official”, that actually shouldn’t matter for the EFFECTS of the dollars and spending.

    So again I ask you, since nobody else is answering:

    At what point does the current 4-5% NGDP growth in the US become a level 5% NGDP growth, if it continues? That should be easy to answer, and yet I see no answer.

    “For the last two years the economy HAS been experiencing NGDPLT.”

    That’s objectively false.

    No, it’s objectively true.

    The economy, meaning market participants, have in fact been EXPERIENCING NGDPLT for the last two years. It doesn’t have to be intentional for them to feel the effects.

    Bernanke, who runs the US Fed, would certainly not agree that he is making decisions in order to control a level of NGDP. I’m not sure where you’re confused: perhaps you don’t understand what NGDPLT actually means; or perhaps you’re confused about what has been happening in the economy in the last few years.

    I am confused that you seem unable to understand that intentions don’t matter when it comes to the effects of 4-5% NGDP growth. Dollars and spending are not conscious. If there is 4-5% NGDP growth, and there has been 4-5% NGDP growth since 2010, then the effects of this ALONE should be identical to intentional 4-5% NGDP targeting. You can’t say unintentional 5% NGDP growth has different effects than intentional 5% NGDP growth. Not without abandoning the very foundation of NGDP targeting.

    But the one thing that’s clear is that NOBODY “” either the MMs who favor the policy, or the other economists who oppose it “” think that NGDPLT has been happening for the last few years. You’re the only one who has made that claim.

    I realize that. I realize I am making that claim. When I look at the data, I see quite clearly that we have had 4-5% NGDP growth since 2010. Either the data is wrong, or you’re wrong. If you have better data than the St. Louis FRED, I’m all ears.

    You seem to be of the belief that NGDP has different effects, depending on whether it is intentional by the Fed or not. As if 100 years of unintentional 5% NGDP growth would have different effects than 100 years of intentional 5% NGDP growth.

    If it’s intentions that matter, then the actual 5% NGDP growth doesn’t matter.

    “I have challenged market monetarists to tell me just how long 5% rate targeting has to take place before it “evolves” into 5% LT. None have answered.”

    A simple question, with an easy answer: Never. A coincidental growth rate is simply a different thing from a level target commitment. It’s not a matter of “how much time”. They are different things. No matter how much you get of the first thing, it never turns into the second thing.

    How are they different in terms of their economic effects? Imagine you were an outside observer, and you observed NGDP rising by 5% per year, every year, in a country. Regarding the effects of this, are you seriously suggesting that the effects of the same 5% NGDP growth will be different depending on the THOUGHTS of the people bringing it about? That if they intended to do it, the 5% NGDP would have different effects than if they didn’t intend to do it, despite the fact that they are both exactly the same 5% NGDP growth?

    You’re actually saying 5% NGDP growth doesn’t have the same effect unless the people bringing it about are thinking in a certain way. What the heck? That sounds superstitious. Who cares what they are thinking? If the 5% NGDP growth is taking place, what difference does it make for market participants? You can’t say they will spend less or more, because by definition they’re spending 5% more each year. You can’t say people will make the wrong decisions, because 5% NGDP growth is supposed to eliminate any such wrong decisions over time.

    It seems like you’re saying you don’t care even if there is 5% NGDP growth. You seem to only care that a central bank is intentionally controlling it.

    “If you say 2 years is not enough to turn 5% RT into 5% LT, then I ask you again for the millionth time: HOW LONG IS THE TIME PERIOD?”

    Never.

    Suppose that the Fed announces that they will engage in 5% NGDPLT tomorrow. Suppose for the next 10 years roughly 5% NGDP growth takes place. Now, suppose at the end of the 10 years, you discover that the Fed played a joke. They didn’t actually intend to engage in NGDPLT at all, but it just so happened that there was roughly 5% NGDP growth for that 10 year period.

    Given these events take place, will you say that the economy would have been in any way different BECAUSE of the NGDP alone, if it was in fact intentional? Or would you say “Damn, it was unintentional? That changes everything! We could have done better! We could have produced more!” ??

    Is that enough for you to realize that you have a fundamental misunderstanding of the idea?

    Sorry, it doesn’t. Your answers have shown me that you have a fundamental of a fundamental misunderstanding of NGDP targeting. You’re telling me that the same 5% NGDP growth rates will have different effects on the economy depending on the mental state of Fed board members whom we cannot mind read. You’re saying we could experience 5% NGDP growth forever, and that wouldn’t be NGDPLT, solely because certain people have certain ideas, as if market participants are affected differently by 5% NGDP due to the mindsets of those who bring it about.

    What is exactly different, for the market, between intentional 5% NGDP and unintentional 5% NGDP? If people are getting 5% more revenues on average each year, why are the dollars different in the two cases?

    “So let me ask this again, for the millionth and one time:
    GIVEN that we currently have 4-5% NGDP growth, since 2010, HOW LONG of a time must pass before that 5% rate growth can be assumed to be 5% level growth?”

    Never.

    Um, you already answered this. Once is sufficient.

    “Should we wait 100 years before you’ll say “OK, yes, we’ve had 5% LT”?”

    I would never say that, because it isn’t true.

    Why isn’t it true? Because it was unintentional? Who cares? If it’s 5% NGDP itself that is the primary goal, it shouldn’t matter whether it was intentional or not. That’s 5% NGDP growth.

    “If you say more than 2 years is needed”

    I would say that NGDPLT is needed, which so far has been tried for zero years.

    We have had it for the last 2 years, and prior to 2008, we had it for many more years.

    “You just asserted that in a healthy economy, 5% LT will “keep it healthy”. But that requires one to a priori accept that indefinite monetary inflation that results a constant spending growth doesn’t harm economies!”

    No, it’s not an assumption. It’s an assertion, or conclusion, backed by careful examination of the historical economic data.

    Assumption. Got it.

    (In particular, the incredible performance of the US economy from ~1980-2005.)

    Hahaha, but we didn’t have NGDPLT 1980-2005!

    Are you for real? You said we have never had NGDPLT, and yet you’re claiming there is historical evidence that NGDPLT works!??!?

    Goodness gracious. I’ve seen hubris in my time, but this…I don’t even know what to say.

    You see that folks? When the economy slumps 2010-2012, it’s because we don’t have NGDPLT even though we have had NGDPLT. When the economy booms 1980-2005, it’s because we had NGDPLT even though we didn’t have NGDPLT.

    No one is requiring you to accept it a priori. Your error is your refusal to accept is a posteriori.

    But I cannot accept NGDPLT a posteriori when there is no historical examples of NGDPLT as you yourself claim!

    Hahahaha, you are hilarious.

    “You’re ignoring the fact that 5% NGDP with expectations, and 5% NGDP without expectations, should have the exact same effect on the economy, because it’s the 5% NGDP itself that is supposed to bring the gains/stability.”

    Expectations are critical, and your dismissal of them shows that you don’t even understand the basic theory.

    How are expectations “critical” if there is actual 5% NGDP growth anyway?

    I don’t dismiss expectations. I dismiss your claim that 5% NGDP growth somehow has different effects depending on whether it is intentional or not. I am assuming your own theory is true for the sake of argument, and then analyzing the implications. I am assuming that 5% NGDP growth has the effects you claim it has.

    So tell me, how do expectations of NGDP play a role in two worlds, one where 5% NGDP is intentional, and another where 5% NGDP growth is unintentional? What would be different between the two, and why?

    Now, it is possible to understand the theory, and still disagree with it intelligently. But right now you’re arguing against a theory that even the MMs are not proposing. You’re making up your own strawmen ideas, and then criticizing them.

    Which straw men?

    If you want to comment constructively, the first thing you need to do is to understand what the other guy is saying. You haven’t yet demonstrated that you understand the NGDPLT proposal, so all your attempted criticisms are just irrelevant.

    I disagree.

    “You can’t tell me that the economy isn’t really recovering because investors and entrepreneurs don’t think the current 4-5% NGDP is going to last.”

    Yes. That’s exactly what MMs are saying.

    But they’re getting the 5% NGDP growth

    (Plus, you’re leaving out the damaged caused by the huge plunge in NGDP in 2008.)

    Yes, I did leave out what I consider fallacious. I consider the “damage” to in fact be a healthy, good, healing process. I do not accept the theory that falling NGDP due to the market process (and not your silly hysterical imaginary cases of 90% of the money supply evaporating into thin air) is “damaging.” I consider the free market process to be inherently healing, all the time, where mistakes are corrected and good decisions are promoted.

    I do not accept your a priori theory that a market driven fall in NGDP (nobody forced people to spend less or lend less money) is somehow destructive and damaging, nor do I accept the a priori theory that it is the government’s responsibility to print money for itself and their friends whenever NGDP falls below some arbitrary growth path.

    “You aren’t seriously suggesting that 4-5% NGDP growth won’t work if investors have a certain disposition regarding that 4-5% NGDP, do you?”

    Yes.

    How so? Be specific.

    “Are you saying successfully targeting 5% NGDP growth can fail, if investors have mindsets that are not what you expected them to be with 5% NGDP growth targeting?”

    Yes. It seems that you need to learn the basics about expectations. Do you understand the Chuck Norris effect?

    You keep patronizing me, but everything you have said displays zero knowledge of NGDP, or the market process.

    I understand expectations quite alright, thank you very much. What I find problematic is your claim that 5% NGDP growth will have different effects depending on the intentions of the people bringing it about, and what those differences will be. You didn’t even attempt to explain why 5% NGDP growth won’t work if investors think it’s unintentional.

  42. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 12:32

    dwb:

    maybe you’re just not high enough on the food chain. check those presentations that go to your CFO. See if they have GDP and inflation expectations in them. next time you are in a meeting with them, ask how your company uses them.

    Maybe you want me to talk about people who don’t exist, but you have faith they exist, and it would cast a serious cloud over your worldview if you found out they in fact don’t exist, so let’s just mock people into believing they exist for your sake?

    Maybe you were never a part of the food chain, because I can tell you that the majority of companies don’t even have CFOs. The majority of businesses are small businesses, and small businesses don’t have the typical “boardroom with cigar chomping CEOs and CFOs” that you naively have in your mind.

    You have never run a business, have you?

  43. Gravatar of Negation of Ideology Negation of Ideology
    13. June 2012 at 12:44

    Major –

    I’m not sure if you’re being difficult on purpose, but you ask

    “How can that question be the basis for you saying the same thing will happen as what I said?”

    I didn’t say the “same thing would happen as something that Major Freeman said would happen”. I’m not sure where you are getting that from. I said that the same thing would happen as would happen in a different NGDP scenario. Some contracts will be fulfilled, some will be defaulted on. Some expectations will be fulfilled and some won’t. That is always true.

    “What premise?”

    Asked and answered. – your premise of “the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    “Then what is the purpose of calculating the average, and what good will it do for the many credit contract owners whose contracts are not that average? ”

    Asked and answered. “The advantage of an average is it is by definition the closest.” Closest to the most contracts, weighted by dollar value. Thus, it would do more good for more contracts than alternate policies.

    Look, I’m not going to keep cutting and pasting my comments over and over again. I answered your questions repeatedly in a manner that anyone with an eighth grade reading level could understand. I know you have this little game where you intentionally try to be difficult to irritate people – you’re not fooling anyone. If you have legitimate questions, I’ll be happy to answer them.

  44. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 13:05

    Propagation of Ideology:

    I’m not sure if you’re being difficult on purpose

    I appear difficult to you in exactly the same way you appear difficult to me. You won’t budge, and neither will I. I won’t accept what I think is wrong.

    but you ask

    “How can that question be the basis for you saying the same thing will happen as what I said?”

    I didn’t say the “same thing would happen as something that Major Freeman said would happen”. I’m not sure where you are getting that from. I said that the same thing would happen as would happen in a different NGDP scenario.

    What same thing? I didn’t say anything that would enable you to say that what I said would also happen in a different NGDP scenario! What is this “same thing” you are referring to? All I did was ask a series of questions, and you started making arguments that show you think I am making outright statements.

    For example, in response to these questions I asked:

    “Then what? What is going to happen to virtually the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    You responded:

    “Nice try, but that is true no matter what the value of the dollar is.”

    WHAT “is true” no matter what? I didn’t say anything that can be labeled as true or false. I asked two questions.

    Finally, you answered them:

    Some contracts will be fulfilled, some will be defaulted on. Some expectations will be fulfilled and some won’t. That is always true.

    Some will be fulfilled, some will be defaulted on? That’s it? How callous. Sacrifice the sheep to save the wolf.

    What percentage will be defaulted on, and what percentage will not be defaulted on? Why should those who just so happen to have outstanding credit contracts that are far enough away from your average calculation, be screwed by your actions, or the actions of those who do what you are calling for? What did they do to deserve being screwed by your positive actions, when all they did was agree to a credit contract that is different from “the magical average”?

    And no, you can’t say “that is always true”, because the thing you’re calling for doesn’t exist in a free market. Defaults and fulfilled contracts would be a function of market competition in production, it won’t be determined by the arbitrary decrees of central planners scribbling averages in their notebooks. You’re comparing apples and oranges. By your logic, since murder and theft will probably take place anyway, why not have the powers that be set an average target for murder and theft. After all, “given” that they are murdering and stealing from people anyway…

    “What premise?”

    Asked and answered. – your premise of “the entire population of credit contract parties whose credit contracts are NOT the “average” you calculated?”

    There you go again. How in the world can a question have a premise? Only declarative propositions can have premises. Questions are not declarative propositions.

    “Then what is the purpose of calculating the average, and what good will it do for the many credit contract owners whose contracts are not that average?”

    Asked and answered. “The advantage of an average is it is by definition the closest.” Closest to the most contracts, weighted by dollar value. Thus, it would do more good for more contracts than alternate policies.

    You also didn’t answer this question either. What good will the average calculation do for the many credit contract owners whose contracts are NOT that average?

    Why are you being so evasive? It’s a simple question.

    Look, I’m not going to keep cutting and pasting my comments over and over again.

    You’re not even answering the questions that can enable you to cut and paste your comments over and over again! You and Don Geddis are just repeating what Sumner is saying like a bunch of friggin parrots.

    You are not answering my questions, so stop claiming to be answering them. You’re dodging them to no end.

    I answered your questions repeatedly in a manner that anyone with an eighth grade reading level could understand.

    No, you did not. You evaded them, as I have clearly shown.

    I know you have this little game where you intentionally try to be difficult to irritate people – you’re not fooling anyone. If you have legitimate questions, I’ll be happy to answer them.

    Oh, so now my questions aren’t “legitimate”? Hahahaha. Don’t you mean…uncomfortable?

    So the questions you won’t answer, are now not legitimate anyway.

    You’re one evasive commenter, Propagation of Ideology.

  45. Gravatar of Don Geddis Don Geddis
    13. June 2012 at 13:26

    MF: “If NGDP growth has been 4-5% since 2010, then that is NGDP de facto targeting.

    No, it isn’t. NGDPLT isn’t even your theory. Don’t you find it odd that you’re making claims for it, that the people who invented it don’t support?

    Perhaps you don’t understand the difference, but that’s about you, not about the theory.

    You can’t say unintentional 5% NGDP growth has different effects than intentional 5% NGDP growth. Not without abandoning the very foundation of NGDP targeting.

    Now you’re suddenly an expert on the foundations of NGDPLT? You don’t even understand the basics! (Moreover, the people who invented it, disagree with you.)

    When I look at the data, I see quite clearly that we have had 4-5% NGDP growth since 2010. Either the data is wrong, or you’re wrong.

    What you’re wrong about, is whether accidental 5% annual NGDP growth is identical to the Fed adopting NGDPLT.

    Oh, and you’re also wrong about the idea that 5% NGDP growth, starting in 2010, would be expected to eliminate the recession and return to full employment. When Sumner has talked about a 5% NGDPLT, he’s assuming that we’re starting from a healthy economy. Helping an economy recover from a demand-side recession is a completely different, much more difficult problem. But you don’t even understand the easy case, so let’s not complicate it with the difficult one.

    Nonetheless, it’s important for you to realize that nobody (except, apparently, you) would have predicted that 5% NGDP growth for 2010-2012 would somehow magically return an economy in recession, to a healthy economy. That’s not what Sumner’s theory predicts at all, but once again you don’t understand it.

    Hahaha, but we didn’t have NGDPLT 1980-2005!

    You seem to have reading comprehension problems. I was obviously referring to your (false) “a priori” claim: “But that requires one to a priori accept that indefinite monetary inflation that results a constant spending growth doesn’t harm economies!” I was showing you that it is not an a priori assumption, but in fact is supported by a great deal of evidence. This has nothing to do with NGDPLT.

    Which straw men?

    Your idea that somehow, two years (2010-2012) of accidental 5% NGDP growth during a recession, is a real-world test of 5% NGDPLT on a healthy economy. You’re asking NGDPLT proponents to defend claims about the last two years that they never made. You’re the only one who makes those claims, and then you criticize them. You’re just talking to yourself, in your own little tiny room.

    You didn’t even attempt to explain why 5% NGDP growth won’t work if investors think it’s unintentional.

    You’re correct, I didn’t attempt to explain. But that’s because you’re not serious about trying to learn anything, so it would be a waste of time. If you had approached this subject with, “I don’t understand why…” instead of making assertions from ignorance, perhaps someone might have helped walk you through Sumner’s National Affairs article on Re-Targeting the Fed.

    But as it is, you’re playing games of rhetoric, not engaging in substantive discussions about content.

  46. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 13:58

    Don Geddis:

    “If NGDP growth has been 4-5% since 2010, then that is NGDP de facto targeting.”

    No, it isn’t.

    Yes, it is.

    NGDPLT isn’t even your theory.

    I realize that. But I know when 4-5% NGDP growth takes place, and it’s been happening since 2010. If you don’t want to call that “level” NGDP, fine, we can wait until rapture. But you’ll only be proving to me that NGDP targeting theory is not falsifiable.

    Don’t you find it odd that you’re making claims for it, that the people who invented it don’t support?

    Not really. All central planning doctrines have to be muddle-headed by design. If they were absolutely clear and obvious, nobody would accept it except lunatics.

    Perhaps you don’t understand the difference, but that’s about you, not about the theory.

    No, it’s the theory, not me.

    “You can’t say unintentional 5% NGDP growth has different effects than intentional 5% NGDP growth. Not without abandoning the very foundation of NGDP targeting.”

    Now you’re suddenly an expert on the foundations of NGDPLT? You don’t even understand the basics! (Moreover, the people who invented it, disagree with you.)

    You haven’t shown me how I don’t understand the basics! You’ve only been addressing straw men the entire time.

    “When I look at the data, I see quite clearly that we have had 4-5% NGDP growth since 2010. Either the data is wrong, or you’re wrong.”

    What you’re wrong about, is whether accidental 5% annual NGDP growth is identical to the Fed adopting NGDPLT.

    I didn’t claim that they are identical. I said they should have identical effects, IF the theory of NGDP targeting is true.

    You can’t point to 1980-2005 and say NGDPLT has been confirmed as a theory, and then turn around and say we’ve never had NGDPLT! You don’t see the contradiction in what you’re saying?

    You’re telling me that I am somehow making the mistake of believing we’ve had NGDPLT since 2010, which I have always only said de facto NGDPLT, and we’ve had the EFFECTS of NGDPLT, by virtue of the 4-5% NGDP growth, and yet there you are saying NGDPLT is a confirmed theory on the basis of historical data? You’re not making any sense.

    Oh, and you’re also wrong about the idea that 5% NGDP growth, starting in 2010, would be expected to eliminate the recession and return to full employment. When Sumner has talked about a 5% NGDPLT, he’s assuming that we’re starting from a healthy economy.

    That’s false. Sumner has said many times that we need more inflation to help the economy, that we don’t have NGDPLT, and that if we had NGDPLT since 2008, which was NOT a healthy economy by the way, then we could have avoided the prolonged recession.

    You don’t even know what Sumner is saying.

    Helping an economy recover from a demand-side recession is a completely different, much more difficult problem.

    You mean more demand cannot solve a demand-side recession?

    Wouldn’t it make more sense to say that more demand cannot solve a supply side recession?

    I think you’re mixed up.

    But you don’t even understand the easy case, so let’s not complicate it with the difficult one.

    You don’t understand what you are saying, and you don’t understand what Sumner has said.

    Nonetheless, it’s important for you to realize that nobody (except, apparently, you) would have predicted that 5% NGDP growth for 2010-2012 would somehow magically return an economy in recession, to a healthy economy.

    I didn’t say “magically.” That’s a straw man. I argued that 2 years should be sufficient time to allow for price corrections given a constant, perpetual, 4-5% NGDP growth, such that the resulting data should enable us to test whether 4-5% NGDP is doing what it promises to do.

    That’s not what Sumner’s theory predicts at all, but once again you don’t understand it.

    The problem is that Sumner’s theory doesn’t even make any predictions in this respect. That’s why you attributed that straw man to me. It’s because Sumner lacks it, you lack it, so you have to imagine me making an extreme argument so that you can argue against that. This happens all too often.

    I asked how long will we have to have 4-5% NGDP growth until it “does its job”, and the only semblance of an answer I have received that comes even close to making sense, is “when the economy recovers.”

    “Hahaha, but we didn’t have NGDPLT 1980-2005!”

    You seem to have reading comprehension problems. I was obviously referring to your (false) “a priori” claim: “But that requires one to a priori accept that indefinite monetary inflation that results a constant spending growth doesn’t harm economies!” I was showing you that it is not an a priori assumption, but in fact is supported by a great deal of evidence. This has nothing to do with NGDPLT.

    Sorry, but your pathetic claims that the problem is somehow my reading comprehension are totally empty. I said:

    “You just asserted that in a healthy economy, 5% LT will “keep it healthy”. But that requires one to a priori accept that indefinite monetary inflation that results a constant spending growth doesn’t harm economies!”

    You said in response to this:

    No, it’s not an assumption. It’s an assertion, or conclusion, backed by careful examination of the historical economic data. (In particular, the incredible performance of the US economy from ~1980-2005.)

    You clearly claimed that the period 1980-2005 is evidence that NGDPLT works, and yet you also said we never had NGDPLT, and you even specifically mentioned that NGDPLT is only present when it is INTENDED. So you did claim that the non-existence of NGDPLT data, of non-NGDPLT data, can somehow be evidence that NGDPLT works.

    You can’t claim that it is evidence on the basis that NGDP was stable, because than you would be contradicting your other claim that it has to be intentional for stable NGDP to do what you claim the theory behind NGDP argues.

    So you’re nailed, Don. Admit it and go home and hit the books.

    Or, you can continue with these embarrassing posts of yours. That would be fun too.

    “Which straw men?”

    Your idea that somehow, two years (2010-2012) of accidental 5% NGDP growth during a recession, is a real-world test of 5% NGDPLT on a healthy economy.

    Yet another straw man to back up your empty claim. I didn’t say it was a test of 5% NGDP on a healthy economy. I said numerous times that the economy is still in the dumps.

    I said 2010-2012 should be a real world test for what 4-5% NGDP does to the US economy, because 2 years, I submit, is enough time to allow for prices to correct to the new aggregate money and spending growth conditions.

    I invited you to disagree with me on this, and to show why 2 years isn’t enough. I invited you to show me just how long is enough, but then you panicked and said “never”, if it isn’t intentional, which, recall, contradicts your claim that 1980-2005 is empirical evidence of NGDPLT.

    You’re asking NGDPLT proponents to defend claims about the last two years that they never made.

    What claims? You’re not showing me claims I am making. You sneaked in “healthy economy” like I wouldn’t notice?

    You’re the only one who makes those claims, and then you criticize them. You’re just talking to yourself, in your own little tiny room.

    Look in the mirror.

    “You didn’t even attempt to explain why 5% NGDP growth won’t work if investors think it’s unintentional.”

    You’re correct, I didn’t attempt to explain. But that’s because you’re not serious about trying to learn anything, so it would be a waste of time.

    In other words, you have no idea. Gotcha.

    If you had approached this subject with, “I don’t understand why…” instead of making assertions from ignorance, perhaps someone might have helped walk you through Sumner’s National Affairs article on Re-Targeting the Fed.

    Oh, so you want a little b&%$ch. Now it makes sense. Sorry, look for that person elsewhere.

    I can take your approach in any way you dish out. Why are you not able to do it?

    But as it is, you’re playing games of rhetoric, not engaging in substantive discussions about content.

    False. I am engaging in a substantive argument that you continue to evade, distort, and fail to even answer the simplest questions.

  47. Gravatar of Negation of Ideology Negation of Ideology
    13. June 2012 at 14:19

    “What good will the average calculation do for the many credit contract owners whose contracts are NOT that average?”

    Ok, that’s a legitimate question. That would depend on each individual contract, and the extent that person benefited or was harmed from the overall changes in the economy. In other words, there are too many variables to answer for each individual. So the answer is – it will do some contract owners good, some harm, and some will come out about even.

    “And no, you can’t say “that is always true”, because the thing you’re calling for doesn’t exist in a free market.”

    The people who entered into those contracts did so voluntarily, knowing that the dollar issuer can make changes. When you make investments in dollars, you are betting on the policies of the dollar issuer. In the transition to whatever you mean by the “free market”, people’s expectations would be dashed as well. Some contract holders who acted in good faith and expected the current policies to continue would potentially take a loss when the government “goes on the gold standard” or stops issuing dollars, or disbands itself, or whatever it is you have in mind when you say “free market”. (None of which are really a free market.) It’s absurd to suggest we should never try to improve policies because there may be at least one person who was better of with the old policies.

    And there you go again with the whole idea that someone taking a loss on an investment is a crime. The government doesn’t owe you a living. I’ve made many profitable and many unprofitable investments and I never considered myself a victim.

  48. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 15:20

    Propagation of Ideology:

    “What good will the average calculation do for the many credit contract owners whose contracts are NOT that average?”

    Ok, that’s a legitimate question.

    So you finally got around to thinking of an answer. It’s about time.

    That would depend on each individual contract, and the extent that person benefited or was harmed from the overall changes in the economy. In other words, there are too many variables to answer for each individual.

    Name just a few.

    So the answer is – it will do some contract owners good, some harm, and some will come out about even.

    You will purposefully harm tens of thousands of credit contract owners because they fall outside the range?

    “And no, you can’t say “that is always true”, because the thing you’re calling for doesn’t exist in a free market.”

    The people who entered into those contracts did so voluntarily, knowing that the dollar issuer can make changes.

    They didn’t voluntarily enter into the legal tender and taxation system!

    It’s telling that you would play blame the victim. Why am I not surprised.

    When you make investments in dollars, you are betting on the policies of the dollar issuer.

    When you earn anything, you have to pay taxes in US dollars so you have to trade for them by law.

    In the transition to whatever you mean by the “free market”, people’s expectations would be dashed as well.

    No they wouldn’t. People know very well the rate of precious metals discovery. In fact, it’s even more predictable and manageable than the arbitrarily changing of minds of those at the central bank, who can at any time cook up some new new new policy that this time will work we promise.

    Some contract holders who acted in good faith and expected the current policies to continue would potentially take a loss when the government “goes on the gold standard” or stops issuing dollars, or disbands itself, or whatever it is you have in mind when you say “free market”.

    Not at all. In a transition to a free market gold standard, everyone would make zero losses at first, because every single dollar in existence, and every single dollar owed, would be redeemable for the same quantity of gold, and from then on. It would be similar to dollars being renamed, plus people owning gold besides. Those who don’t want to redeem their dollars into gold, don’t have to.

    (None of which are really a free market.)

    I am talking about allowing gold to compete unimpeded with the dollar. Not forcing everyone to use dollars.

    It’s absurd to suggest we should never try to improve policies because there may be at least one person who was better of with the old policies.

    I agree, I just hold that only the market process can reveal improvements. Let the market process decide. If individuals want to use toilet paper, they can. If people want to use gold, they can. This requires total unimpeded competition for precious metals. That means no taxing capital gains of gold in US dollars. That means no branding gold money users as domestic terrorists. That means taxing gold traders in gold, not US dollars.

    And there you go again with the whole idea that someone taking a loss on an investment is a crime.

    I didn’t say that.

    The government doesn’t owe you a living.

    I didn’t say they did. It’s precisely those in the state, and those who use the state, who free ride off the productive.

    I’ve made many profitable and many unprofitable investments and I never considered myself a victim.

    I don’t care if you don’t consider yourself a victim. Those who benefited from slavery also never considered themselves victims of slavery. I am talking about those who are victimized. The people you seek to brainwash.

  49. Gravatar of Mike Sax Mike Sax
    13. June 2012 at 15:25

    “you’ll only be proving to me that NGDP targeting theory is not falsifiable.”

    Major there you go again, contradicting yourself. Supposedly you don’t think a theory has to be falsfiable. That’s how you justify that canard you call praxeological individualism

  50. Gravatar of Don Geddis Don Geddis
    13. June 2012 at 15:29

    MF: “I said they should have identical effects, IF the theory of NGDP targeting is true.

    Hey! I’ve got an idea. Can you tell me, in your own words, what you think “the theory of NGDP [level?] targeting” actually is? (Think of it as an ideological Turing Test.)

    Sumner has said many times that we need more inflation to help the economy, that we don’t have NGDPLT, and that if we had NGDPLT since 2008 … then we could have avoided the prolonged recession.

    All true. Hint: there’s a difference between growth rate targeting, and level targeting. Which Sumner has made numerous posts about.

    But perhaps you could explain the difference. In your own words?

    should enable us to test whether 4-5% NGDP is doing what it promises to do.

    What do you think it is promising to do? I’ve heard of nobody — except you — who would expect that a couple of years of 5% NGDP growth would allow recovery from this recession. So what promises do you think were there?

    You clearly claimed that the period 1980-2005 is evidence that NGDPLT works

    Nope, never claimed that, and I don’t believe it. But I already explained myself, and you choose to misunderstand me, so I won’t bother to try again.

    2010-2012 should be a real world test for what 4-5% NGDP does to the US economy

    Sure, fine. And what do you conclude? Anyway, this is a useless experiment, because NGDPLT proponents never made any claims about what should happen in such a situation. Which is why it’s so silly for you to cite it, as though it somehow has important implications for evaluating NGDPLT.

  51. Gravatar of dwb dwb
    13. June 2012 at 15:32

    you’ll only be proving to me that NGDP targeting theory is not falsifiable.

    heh, a lie and a contradiction in the same day. must be losing his touch.

  52. Gravatar of ssumner ssumner
    13. June 2012 at 18:52

    dwb, What MF doesn’t realize is that when business people sit around discussing how business will be next year, they are basically talking about NGDP, but don’t use that term.

  53. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 19:51

    Mike Sax:

    “you’ll only be proving to me that NGDP targeting theory is not falsifiable.”

    Major there you go again, contradicting yourself.

    I am not sure I understand. You didn’t show me “contradicting” myself a first time, how can you say “again” as if you have? Maybe you can show me where I did it the first time.

    Supposedly you don’t think a theory has to be falsfiable. That’s how you justify that canard you call praxeological individualism

    Indeed. I was showing that market monetarists, who DO believe theories need to be falsifiable in order to be valid, the same people who chastise Austrian theory for being unscientific due to it being non-falsifiable, such as the person I was having a debate with, are promoting a non-falsifiable theory.

    I didn’t call him out because I think his theory has to be falsifiable. I called him out because he isn’t playing by his own rules.

  54. Gravatar of Mike Sax Mike Sax
    13. June 2012 at 20:18

    Actually Sumner doesn’t believe a theory has to be falsifiable and has said so. So that doesn’t work either.

    What you seem to be saying is that your model doesn’t need to be falsifiable and others don’t.

  55. Gravatar of Mike Sax Mike Sax
    13. June 2012 at 20:19

    And others do.

  56. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 20:34

    Don Geddis:

    “I said they should have identical effects, IF the theory of NGDP targeting is true.”

    Hey! I’ve got an idea. Can you tell me, in your own words, what you think “the theory of NGDP [level?] targeting” actually is? (Think of it as an ideological Turing Test.)

    Hey, I have an even better idea. Can you actually answer my question and explain how intentional 5% NGDP growth differs from unintentional 5% NGDP growth, as it pertains to employment and output, and do so without contradicting the tacit presumption of NGDP targeting theory itself?

    “Sumner has said many times that we need more inflation to help the economy, that we don’t have NGDPLT, and that if we had NGDPLT since 2008 … then we could have avoided the prolonged recession.”

    All true. Hint: there’s a difference between growth rate targeting, and level targeting.

    We’ve gone over this, Don. Please try to keep up. I realize YOU guys are saying there is a difference, but I am not seeing any explanation on when/how rate growth can be assumed as level growth. I’ve seen nothing but you falling over yourself trying to intimidate me into accepting your claims on faith, by making me question my own ability. Here’s a hint: Be unfront and stop trying to convince me of something about me, and start addressing the ideas and arguments. If you don’t have the mental ability to do it, then fine, but you aren’t going to be right the way you’re going about it so far.

    Which Sumner has made numerous posts about.

    He too claims to have answered this, but he hasn’t. So Sumner is claiming he answered these questions, which he didn’t, and you are relying on his non-existent answers to pretend that you’ve answered them.

    But perhaps you could explain the difference. In your own words?

    You want me to do your own homework? You’re hilarious. I’m asking you. You’re the one who is presenting himself as more informed about it then me.

    “should enable us to test whether 4-5% NGDP is doing what it promises to do.”

    What do you think it is promising to do?

    What Sumner claims it can do.

    I’ve heard of nobody “” except you “” who would expect that a couple of years of 5% NGDP growth would allow recovery from this recession. So what promises do you think were there?

    I’ve already invited you to tell me that if 2 years is not enough, then how long is enough. You have dodged that question.

    “You clearly claimed that the period 1980-2005 is evidence that NGDPLT works”

    Nope, never claimed that, and I don’t believe it.

    Oh. My. God.

    Are you for real?

    I said:

    “You just asserted that in a healthy economy, 5% LT will “keep it healthy”. But that requires one to a priori accept that indefinite monetary inflation that results a constant spending growth doesn’t harm economies!”

    You responded:

    “No, it’s not an assumption. It’s an assertion, or conclusion, backed by careful examination of the historical economic data. (In particular, the incredible performance of the US economy from ~1980-2005.)”

    You clearly claimed that NGDPLT theory is BACKED (that means verified in some way) by careful examination of HISTORICAL DATA (that means you’re making observations of data that show NGDPLT works), in particular THE PERFORMANCE OF THE US ECONOMAY 1980-2005 (that means you are claiming the economic data 1980-2005 shows NGDPLT works).

    How can you possibly claim NGDPLT theory has been shown to work 1980-2005, without access to NGDPLT data 1980-2005?

    You might as well say data prior to 1900 shows evidence minimum wage makes workers better/worse off. Or that the data during the 1940s shows evidence that personal computers improves worker productivity.

    Don, I highly recommend that you cease embarrassing yourself. It’s getting quite sad. Just admit that you did what Krugman likes to do, which is use two mutually contradictory arguments to prove that the same data is saying two different things, depending on who you’re arguing against in order to “prove” your theory correct.

    If we didn’t have NGDPLT 1980-2005, and if we cannot, according to you yourself, say that unintentional NGDPLT is the same thing as intentional NGDPLT, then sorry, you simply cannot claim that the data 1980-2005 shows evidence that NGDPLT theory works. If the NGDP was intentional, I would have granted you that NGDPLT theory has empirical consistency. But you goofed and went out of your way to insist that 2010-2012 isn’t real NGDPLT because it isn’t intentional, and so I cannot make any claims about NGDPLT theory based on that data.

    In other words, I will ask you this question, and maybe you’ll finally be honest with yourself and me:

    Why are you allowed to use the unintentional NGDPLT data 1980-2005 to show the validity of NGPLT theory, but I am not allowed to use the unintentional NGDLT data 2010-2012 to say anything negative about NGDPLT? Please note that you cannot say it’s because “it hasn’t been enough time”, because you specifically said we don’t have NGDPLT right now so I cannot make ANY inferences on NGDPLT theory at all.

    In other words, when I tried to use the data to say something negative about NGDPLT theory, you bit my head off and said I am wrong to even assume there is NGDPLT data to collect. When you want to say something positive about NGDPLT, you went ahead and used data from 1980-2005, even though that isn’t NGDPLT data according to your own claim!

    But I already explained myself, and you choose to misunderstand me, so I won’t bother to try again.

    Sorry, you’re not going to pretend you never made this contradiction, and that I am only “misunderstanding” you. I am not misunderstanding you. I read you loud and clear.

    You won’t bother to try again because you know you got caught.

    “2010-2012 should be a real world test for what 4-5% NGDP does to the US economy”

    Sure, fine. And what do you conclude?

    So after all your posturing, you FINALLY concede. Was that so hard? Don’t worry, I’m anonymous. I cannot “officially” claim victory and have my name printed on a plaque. This is ALL for the ideas and arguments and how to improve ourselves.

    What do I conclude? I conclude that NGDP theory as is, is in serious trouble. I will never say that NGDP theory can be conclusively refuted or proven by any data, including 2010-2012, as well as 1980-2005. For no matter what you think NGDP theory is supposed to do when practiced, I can ALWAYS, ALWAYS, postulate a counter-theory that what we are observing historically, is occurring DESPITE NGDP targeting (if it is taking place) and not BECAUSE NGDP targeting is taking place.

    You might think this is just being antagonistic, you might think I’m arguing for the sake of arguing, but it is INCREDIBLY important. It is perhaps one of the most important lessons anyone can ever learn in economics. I thought that Yichuan guy got it, but he didn’t want to abandon believing in NGDP theory so he tried to make it seem like looking at other data can “help” decide which of two mutually exclusive theories is the right one. So as it stands, he’s a lost cause too, just like most of the others here.

    NGDP theory can only ever be refuted or proven in the realm of ideas. Not only did I know all along that it is non-falsifiable (which is OK in principle, as I think economic theories do not have to be falsifiable), but also by observing very closely all the arguments market monetarist supoorters are presenting on this blog. Sumner is mentally so invested in NGDP that he’s too old to turn back his mind even if he’s wrong. At this point, he’ll feel vindicated if his masters in power adopt his ideas. It doesn’t matter proving NGDP true. It doesn’t matter if “helping” bad investments and preventing temporary unemployment in the correction process makes the economy worse. Guilt is overpowered by ambition. NGDP just has to be the idea of those with power. Notice how giddy he gets whenever his masters mention NGDP favorably. I ask where the integrity is, but it’s nowhere to be found. It is how morally and intellectually bankrupt academics behave. They truly feel that their purpose in life is to convince power hungry statesmen and bureaucrats to use their power in a slightly different way, but still exploiting innocent people in the process, because screw it, it ain’t going away any time soon.

    Anyway, this is a useless experiment, because NGDPLT proponents never made any claims about what should happen in such a situation.

    No, of course not. No claims at all. For that would bring about opportunities for falsification. Better claim 1980-2005 is NGDPLT data that shows NGPLT works, even though it’s not really NGDPLT data.

    Which is why it’s so silly for you to cite it, as though it somehow has important implications for evaluating NGDPLT.

    I don’t have to wait for NGDPLT academics to make claims about 2010-2012 before I can judge NGDPLT theory. I can do that myself. It’s not “silly” for me to, without being asked, go out and see just what happens to the economy when there is 4-5% NGDP growth by virtue of “drug dealers” with a printing press.

    dwb:

    “you’ll only be proving to me that NGDP targeting theory is not falsifiable.”

    heh, a lie and a contradiction in the same day. must be losing his touch.

    What lie, and what contradiction? You haven’t shown either.

    ssumner
    13. June 2012 at 18:52
    dwb, What MF doesn’t realize is that when business people sit around discussing how business will be next year, they are basically talking about NGDP, but don’t use that term.

  57. Gravatar of Major_Freedom Major_Freedom
    13. June 2012 at 20:43

    ssumner:

    What MF doesn’t realize is that when business people sit around discussing how business will be next year, they are basically talking about NGDP, but don’t use that term.

    No, they are most certainly not. They are talking precisely about their own expected sales next year, and perhaps expectations of their direct competition’s sales.

    The fact that you use the word “basically” is a dead giveaway.

    Sorry Sumner, but most businessmen don’t care at all about NGDP. What you are proposing is something that only central planners who need to tax out of NGDP, would care about. No individual can economize NGDP. No individual can act upon NGDP. No individual is affected by NGDP. NGDP is a pretty much worthless, abstract sum of separate, mutually exclusive events. You might as well say there should be aggregate labor hour targeting, or aggregate driving distance targeting.

    I mean after all, if 90% of labor hours disappeared overnight, or if the total distance traveled fell by 90%, then that would have an effect on the real economy, wouldn’t it? Better ask the magical wizards in Washington and/or NY to ensure that whenever labor hours declines, they hire oompa loompas to make up the labor hour loss by making chocolate, and if the total distance travelled collapsed, that they hire those same oopma loompas to run back and forth really fast.

    I don’t care if unemployment or output collapses. I’ve done my job at ensuring that there are enough labor hours performed and enough distance traveled. If there are still problems, blame the liberals and Keynesians. Not my problem!

  58. Gravatar of Don Geddis Don Geddis
    14. June 2012 at 13:26

    MF: “and do so without contradicting the tacit presumption of NGDP targeting theory itself?

    You keep saying things like this, but you never say what (you think) “the tacit presumption of NGDP targeting” actually is. I keep trying to ask you, but for some reason you don’t seem to answer: can you tell me how you think NGDP targeting is supposed to work? (I know you disagree with it. I’m just trying to understand what you think it is.)

    I am not seeing any explanation on when/how rate growth can be assumed as level growth.

    You asked before, and I already answered clearly: never.

    I’ve already invited you to tell me that if 2 years is not enough, then how long is enough. You have dodged that question.

    I haven’t dodged. I answered clearly. But, if you want, I’ll answer clearly yet again: never. It’s not a matter of mere time. 5% annual NGDP growth is not any kind of cure for the recession of 2008. Presumably, the economy will eventually grow out of it by itself, perhaps 5 or 10 or 20 years from now. But if you’re not applying the obvious medicine to the sick patient, then the rate of recovery really isn’t under anyone’s deliberate control.

    How can you possibly claim NGDPLT theory has been shown to work 1980-2005

    I don’t know how I can be more clear. I never claimed this, and also — even more important — I don’t actually believe it. You should forget about what you think I wrote in the past, and just try to understand the words I’m writing now: NO, I DO NOT BELIEVE, that the US economy 1980-2005 “showed” that NGDPLT “works”. For the simple reason that the Fed wasn’t doing NGDPLT from 1980-2005. Kind of obvious, really.

    So hopefully, if you actually care about content (as you claim) rather than just scoring rhetorical points (as you demonstrate), you’ll stop with all these statements that you think I believe 1980-2005 “proved” NGDPLT. I don’t.

    I’m not sure why you continue to misunderstand my original words, but if you’re curious about your logic error, you basically asked: “level targeting … requires … a priori [foobar assumption]”. And I replied: “LT might require [foobar], but [foobar] isn’t an a priori assumption. [foobar] is supported by economic evidence from 1980-2005.”

    Can you see the difference now? I never said that 1980-2005 showed anything about NGDPLT. Only about [foobar].

    you simply cannot claim that the data 1980-2005 shows evidence that NGDPLT theory works.

    Yup! I agree. So, thank god that I don’t make that claim.

    I can judge NGDPLT theory. … go out and see just what happens to the economy when there is 4-5% NGDP growth

    Your error is that NGDPLT theory isn’t making any particular predictions for what should happen to an economy in recession, when given mere 5% growth (and without the Fed actually running NGDPLT!). So why do you think you can learn anything about NGDPLT theory by looking at the last few years in the US? How does the economy’s performance have anything to do with NGDPLT claims?

  59. Gravatar of Major_Freedom Major_Freedom
    14. June 2012 at 14:00

    Don Geddis:

    I’m actually surprised you’re back. I thought after the disaster that was your last post, you’d at least have the preference to cease digging that hole. Oh well, if you insist…

    “and do so without contradicting the tacit presumption of NGDP targeting theory itself?”

    You keep saying things like this, but you never say what (you think) “the tacit presumption of NGDP targeting” actually is.

    You’re just continuing to evade, aren’t you? You don’t want to answer the questions I am asking, so you try to turn this around into quizzing me on NGDP? That’s funny. We can discuss the theory of NGDPLT in depth later. For now, I’d rather not derail this discussion.

    I keep trying to ask you, but for some reason you don’t seem to answer: can you tell me how you think NGDP targeting is supposed to work? (I know you disagree with it. I’m just trying to understand what you think it is.)

    I keep trying to ask you, but for some reason you don’t seem to answer:

    How will intentional 5% NGDP growth differ from unintentional 5% NGDP growth, as it pertains to employment and output, and can you answer this without contradicting the tacit presumption of NGDP targeting theory itself?

    “I am not seeing any explanation on when/how rate growth can be assumed as level growth.”

    You asked before, and I already answered clearly: never.

    Then you can’t claim 1980-2005 is empirical evidence that NGDPLT “keeps economies healthy”.

    It’s not a matter of mere time. 5% annual NGDP growth is not any kind of cure for the recession of 2008.

    So then you can’t claim 5% NGDPLT since late-2008 could have cured the recession.

    Presumably, the economy will eventually grow out of it by itself, perhaps 5 or 10 or 20 years from now. But if you’re not applying the obvious medicine to the sick patient, then the rate of recovery really isn’t under anyone’s deliberate control.

    “the market will grow by itself.”

    Grow how much? As much as it can? Or can it grow more if NGDPLT is not utilized?

    you basically asked: “level targeting … requires … a priori [foobar assumption]”. And I replied: “LT might require [foobar], but [foobar] isn’t an a priori assumption. [foobar] is supported by economic evidence from 1980-2005.”

    The “foobar” in question is this:

    “indefinite monetary inflation that results a constant spending growth doesn’t harm economies”

    That is NGDPLT. NGDPLT calls for whatever monetary inflation is sufficient to result in a constant spending growth! I am only looking at the dollars and spending and the effect of printing whatever money is needed to to result in a constant spending growth.

    Can you see the difference now? I never said that 1980-2005 showed anything about NGDPLT. Only about [foobar].

    [foobar] = NGDPLT.

    “you simply cannot claim that the data 1980-2005 shows evidence that NGDPLT theory works.”

    Yup! I agree. So, thank god that I don’t make that claim.

    You did. [foobar] = NGDPLT.

    NGDPLT theory isn’t making any particular predictions for what should happen to an economy in recession, when given mere 5% growth (and without the Fed actually running NGDPLT!).

    So you too believe NGDPLT theory is non-falsifiable. I knew that all along, I just like to hear it from those who believe in the theory. Because then we can finally get to the actual economics of it, which I submit causes economic harm, and is inferior to a free market in money production.

    So why do you think you can learn anything about NGDPLT theory by looking at the last few years in the US?

    The same reason Sumner is claiming we can learn something about NGDPLT by looking at post-2008.

    How does the economy’s performance have anything to do with NGDPLT claims?

    I think it’s because de facto 5% NGDPLT is indistinguishable from de jure 5% NGDPLT, as it pertains to the effects of 5% NGDPLT.

    I’ve invited you more than once to challenge me on this, to explain how de jure (intentional) 5% NGDPLT would differ from de facto (unintentional) 5% NGDPLT, without contradicting the theory of NGDPLT itself.

    You initially balked at this. Maybe this time you’ll answer.

  60. Gravatar of dwb dwb
    14. June 2012 at 14:09

    ” No, they are most certainly not. They are talking precisely about their ownexpected sales next year, and perhaps expectations of their direct competition’s sales”

    CFOs get i-bank and rating agency presentations, part of the package. if youve never seen it, its a big 100 page deck on econonic stuff and forecasts. thats what i-bank economics teams do, why they exist. at medium to large cos, the treasury (or Investor Relations) often sends summaries with market data and market color on on on market moves. you should get into a company and see how it actually operates, stop wasting time yammering about it.

  61. Gravatar of Major_Freedom Major_Freedom
    14. June 2012 at 14:13

    dwb:

    CFOs get i-bank and rating agency presentations, part of the package.

    Most companies don’t even have CFOs.

    if youve never seen it, its a big 100 page deck on econonic stuff and forecasts. thats what i-bank economics teams do, why they exist. at medium to large cos, the treasury (or Investor Relations) often sends summaries with market data and market color on on on market moves.

    How many companies get these? You’re being obtuse. You’re talking about a minority of all businesses.

    Do you have any idea what business in the US actually looks like? Hint: It doesn’t look anything like Bloomberg TV.

    You should actually get into a company and see how it actually operates, and stop wasting time yammering about it. Most company owners don’t care about NGDP.

  62. Gravatar of Major_Freedom Major_Freedom
    14. June 2012 at 14:16

    And out of the companies that do have CFOs, most don’t integrate NGDP into their financial planning.

  63. Gravatar of dwb dwb
    14. June 2012 at 14:42

    “How many companies get these? You’re being obtuse. You’re talking about a minority of all businesses.”

    pretty much every company with outstanding debt gets these regularly (its part of the i-bank sales package and ongoing relationship management), which i know because i used to be on the sell side doing the deck, and on the planning side doing the budgeting.

    When the budget comes out and sales are forecast to rise 15%, employee costs rising 10%, and the Morgan Stanley presentation has trimmed growth and inflation projections, you bet the budget gets kicked back for revisions.

    name a company without a CFO.

  64. Gravatar of Don Geddis Don Geddis
    14. June 2012 at 14:46

    MF: “I keep trying to ask you, but for some reason you don’t seem to answer: How will intentional 5% NGDP growth differ from unintentional 5% NGDP growth, as it pertains to employment and output, and can you answer this without contradicting the tacit presumption of NGDP targeting theory itself?

    I can’t answer, because I don’t understand the question. I don’t know what “the tacit presumption of NGDP targeting theory” means, to you. I keep asking you to clarify the question, but for some reason you won’t do it. I can’t answer a question that I don’t understand.

    Then you can’t claim 1980-2005 is empirical evidence that NGDPLT “keeps economies healthy”. … So then you can’t claim 5% NGDPLT since late-2008 could have cured the recession.

    Agreed! I would never make either of those claims. See how nice this is! We can all just get along.

    So you too believe NGDPLT theory is non-falsifiable.

    Not at all! It’s just that 5% accidental NGDP growth (along with a Fed not running NGDPLT), from inside a recession, is not a scenario that NGDPLT theory makes many predictions about. But there are plenty of other scenarios that NGDPLT makes very strong predictions about, and it could be “falsified” in those other cases. You just happen to have picked a case where it doesn’t apply.

  65. Gravatar of Major_Freedom Major_Freedom
    14. June 2012 at 15:36

    Don Geddis:

    I can’t answer, because I don’t understand the question. I don’t know what “the tacit presumption of NGDP targeting theory” means, to you. I keep asking you to clarify the question, but for some reason you won’t do it. I can’t answer a question that I don’t understand.

    OK, I’ll rephrase:

    How will intentional 5% NGDP growth differ from unintentional 5% NGDP growth, as it pertains to employment and output, and can you answer this without contradicting NGDPLT theory?

    Agreed! I would never make either of those claims. See how nice this is! We can all just get along.

    You made the former claim.

    Not at all! It’s just that 5% accidental NGDP growth (along with a Fed not running NGDPLT), from inside a recession, is not a scenario that NGDPLT theory makes many predictions about.

    Then explain Scott’s latest post:

    “If NGDP had fallen after the 2007 peak (i.e. if they’d been fixed to the euro), then the real recession would have been much worse.”

    But there are plenty of other scenarios that NGDPLT makes very strong predictions about, and it could be “falsified” in those other cases. You just happen to have picked a case where it doesn’t apply.

    So NGDPLT can only be falsifiable when NGDPLT is working, never when the data would suggest it isn’t working (e.g. a time when NGDP growth is 4-5%, yet the economy is stagnating)?

  66. Gravatar of Major_Freedom Major_Freedom
    14. June 2012 at 15:49

    dwb:

    “How many companies get these? You’re being obtuse. You’re talking about a minority of all businesses.”

    pretty much every company with outstanding debt gets these regularly (its part of the i-bank sales package and ongoing relationship management), which i know because i used to be on the sell side doing the deck, and on the planning side doing the budgeting.

    Personal anecdotes are not evidence.

    And it’s not true that “pretty much every company with debt” gets these regularly. Investment banking reports are for the larger companies that are either public, about to go public, or are contemplating changing to a different corporate charter.

    The majority of business in the country are small, non-CFO companies that have either bank debt or internal debt owned by the owners.

    When the budget comes out and sales are forecast to rise 15%, employee costs rising 10%, and the Morgan Stanley presentation has trimmed growth and inflation projections, you bet the budget gets kicked back for revisions.

    Morgan Stanley is but one large company among tens of thousands.

    You’re cherry picking to no end.

    name a company without a CFO.

    You have got to be kidding me.

    Every business that CFO outsourcing companies this one solicit but have not yet done business with.

  67. Gravatar of Don Geddis Don Geddis
    14. June 2012 at 16:40

    MF: “without contradicting NGDPLT theory

    You keep adding this apparently important phrase, that I don’t understand. I don’t know what you mean by that. (I know what Sumner means by NGDPLT, but it’s more than apparent from all your comments that you have some different idea in mind.)

    You made the former claim.

    See, here’s an example of you trying to “win” a rhetorical game, rather than actually understand anything. Maybe I misspoke earlier. Maybe you misunderstood. Either way, it should be blindingly obvious by now that these are not claims that I support. So why do you keep bringing them up?

    Then explain Scott’s latest post: “If NGDP had fallen after the 2007 peak … then the real recession would have been much worse.”

    Nominal demand shocks have real effects. Falling NGDP causes deeper recessions. That is indeed part of MM theory, although only indirectly related to NGDPLT, and really has nothing to do with your requested prediction of what ought to happen in an economy in deep recession with 5% NGDP growth.

    a time when NGDP growth is 4-5%, yet the economy is stagnating

    When did you EVER see ANY market monetarist claim that 5% NGDP growth would lift an economy out of a deep recession? The only person I’ve ever heard claim that is you, only to immediately criticize it.

    Since this isn’t a claim that MM make about NGDPLT, the continuing stagnation provides no evidence for whether NGDPLT is valid.

  68. Gravatar of dwb dwb
    14. June 2012 at 16:45

    Every business that CFO outsourcing companies this one solicit but have not yet done business with.

    so let me get this straight: your evidence that business planners do not incorporate economic data into their business plans is to send me to a website that, a)as a service, provides an annual and 5 year planning forecast that promises to benchmark assumptions like employee compensation against industry and economic trends; and b) includes a lot of blog postings about economic trends. huh, imagine that.

    and your evidence that business do not need CFOs is to send me to a service that provides CFO services for small businesses.

    you are losing your touch. its taking me less time than usual to call you on your BS.

  69. Gravatar of dwb dwb
    14. June 2012 at 16:49

    … and by the way, this is not the only company that does this. Robert Half, Accountemps, Manpower, and other firms offer similar consulting and accounting/forecasting contracting services.

  70. Gravatar of Major_Freedom Major_Freedom
    21. June 2012 at 00:09

    Don Geddis:

    You keep adding this apparently important phrase, that I don’t understand. I don’t know what you mean by that. (I know what Sumner means by NGDPLT, but it’s more than apparent from all your comments that you have some different idea in mind.)

    There is no one idea of NGDPLT. No market monetarist has defined when constant rate targeting becomes level targeting.

    “You made the former claim.”

    See, here’s an example of you trying to “win” a rhetorical game, rather than actually understand anything. Maybe I misspoke earlier. Maybe you misunderstood. Either way, it should be blindingly obvious by now that these are not claims that I support. So why do you keep bringing them up?

    I am not playing a rhetorical game. I didn’t misunderstand anything. It is blindingly obvious that you claimed 1990-2005 is evidence that shows favorability to NGDP targeting. You said it in black and white. You’ve only been denying it ever since, AFTER you realized you contradicted yourself in attacking my reference to post-2010 data as irrelevant because the NGDP growth wasn’t intentional/official.

    “Then explain Scott’s latest post: “If NGDP had fallen after the 2007 peak … then the real recession would have been much worse.””

    Nominal demand shocks have real effects. Falling NGDP causes deeper recessions. That is indeed part of MM theory, although only indirectly related to NGDPLT, and really has nothing to do with your requested prediction of what ought to happen in an economy in deep recession with 5% NGDP growth.

    Ergo Sumner is using the post-2007 data as evidence that shows validity of NGDP targeting, despite the fact that you said it cannot be used as such evidence because it wasn’t intentional!

    “a time when NGDP growth is 4-5%, yet the economy is stagnating”

    When did you EVER see ANY market monetarist claim that 5% NGDP growth would lift an economy out of a deep recession?

    When did I EVER say that there was ANY deep recession? I am talking about the last two years of 4-5% NGDP growth and economic stagnation.

    How long will you use the excuse that there was a problem in the past? Are you going to be like Obama and claim the economy is terrible in 2016 because Bush left the country in shambles?

    The only person I’ve ever heard claim that is you, only to immediately criticize it.

    My argument is that NGDP targeting after a bust occurs, PROLONGS the correction.

    Since this isn’t a claim that MM make about NGDPLT, the continuing stagnation provides no evidence for whether NGDPLT is valid.

    And yet you claimed (have have since denied) that 1990-2005 does provide evidence that NGDPLT is valid.

  71. Gravatar of Major_Freedom Major_Freedom
    21. June 2012 at 00:37

    “My argument is that NGDP targeting after a bust occurs, PROLONGS the correction.”

    Please note, that can be intentional OR unintentional. It’s the inflation itself and the effect it has on economic calculation.

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