Transcripts post #1: Reasoning from price changes

The transcripts from 2008 are quite long.  I’ve only had time to read the 108 page transcript for September 2008, but already notice some interesting patterns.  Here’s a fairly typical comment (from Kohn):

Not all news affecting spending has been negative. Capital goods orders have held up. The decline in interest rates and commodity prices that respond to the markdown in global growth will help support domestic demand . . .

Many other participants made similar comments.  Now in fairness there are cases where these factors can help.  It depends why oil prices and long term interest rates are falling.  But I am nonetheless struck by the lack of curiosity on this issue.  The participants didn’t seem willing to even entertain as a hypothesis what we now know was the actual cause of these price changes, NGDP was falling of a cliff in the June to December period.  Falling oil prices and falling long term interest rates were actually exceedingly bad news, reflecting plunging demand for oil in the US and elsewhere, and plunging demand for credit in the US.  Everyone seemed to assume they were good news.

Perhaps the FOMC bought into the view that the EMH was bunk.  Hence asset prices were plunging for irrational reasons, and thus were a boon to consumers.

I was also somewhat puzzled by their reaction to the plunging TIPS spreads, which had fallen to 1.23% over 5 years by the day of the meeting (a number that was pretty accurate, in retrospect.) Here’s the staff economist Dave Stockton:

We continue to see reasonably encouraging signs on inflation expectations. The medium-term and long-term inflation expectations in the preliminary Michigan report last week dropped 0.3 percentage point, to 2.9 percent. TIPS haven’t really done very much, and hourly labor compensation continues to come in below our expectations.

That’s simply inaccurate, which is scary when you consider that the members of the FOMC rely on the staff economists for guidance as to the data.  Later in the meeting Janet Yellen correctly notes that TIPS spreads were falling fast:

Furthermore, we have seen a remarkable decline in inflation compensation for the next five years in the TIPS market.

Elsewhere some people referred to the relatively stable 5 year, 5 year forward TIPS spread, so perhaps that’s what Stockton was referring to.  But that’s the wrong data point to look at during a crisis.  Didn’t Keynes say something about the sea becoming calm after the storm was over?

I’ve never trusted RGDP data as much as either industrial production or real gross domestic income data.  Thus I was interested in this comment by Stockton:

Now, this sharp rise in the unemployment rate is a bit difficult to square with a GDP figure that looks as though it was running above 3 percent in the second quarter and even 2 percent if you want to average the first and second quarters together. There are occasionally large errors in Okun’s law, as I think I’ve noted in the past. It seems as though Okun’s law gets obeyed about as frequently as the 55 mile an hour speed limit on I-95. [Laughter] But still, one of the things that we should probably be considering is that perhaps the economy has not been as strong as suggested by the real GDP figures. Real gross domestic income, which is output measured on the income side of the accounts, has risen about 2 percentage points less than GDP over the past year. And if we look at industrial production and compare that with the components of GDP that are, in essence, goods production, there’s about a 1 percentage point discrepancy there, with industrial production suggesting weaker figures than GDP.

The real GDP numbers for the first half of 2008 have been revised sharply lower, and hence we now know the other data was more accurate.  If the Fed had ignored the RGDP data and focused on the more negative information, they might have behaved differently in the second half of 2008 NGDP.

Here’s Bernanke:

If not, let me just make a few comments. Personally, I see the prospects for economic growth in the foreseeable future as quite weak, notwithstanding the second quarter’s strength. I think what we saw in the recent labor reports removes any real doubt that we are in a period that will be designated as an official NBER recession. Unemployment rose 1.1 percentage points in four months, which is a relatively rapid rate of increase.

In the US, that sort of rise in unemployment means recession 100% of the time.  Bernanke was correct in assuming we were in recession, but did not draw the correct policy implication.

Bernanke also noted that some of the rise in the unemployment rate was presumably due to George Bush’s decision to extend the unemployment benefits beyond a maximum of 26 weeks.  At the time, Brad DeLong (correctly) predicted that Bush’s actions would raise the unemployment rate 0.6% by election day, and thus hurt McCain’s chances.  (Recall that this was 2008, before liberals stopped believing that incentives affect the behavior of workers and employers.)

After each participant read their statement, most of the debate was over whether the statement should indicate that markets were being monitored “closely” or “carefully.”  They opted not to use ‘closely,’ as they feared it would lead people to think the Fed was actually paying close attention to the information conveyed by asset prices.  I don’t care which term they use, but I would like to them to pay closer attention to asset prices.

But that wasn’t the only problem in late 2008.  In the early part of 2008 the Fed had adopted a Svenssonian “target the forecast” approach, and it actually worked fairly well.  Here’s Bernanke:

As President Plosser pointed out, we really shouldn’t argue about the level of the funds rate or the level of the spreads. We should think about the forecast and whether our policy path is consistent with achieving our objectives over the forecast period. I am sympathetic to the general view taken by the staff, which argues that those recession dynamics and financial restraints are important, that we are looking at slow growth going forward, and that inflation is likely to moderate. Based on those assumptions, I think that our policy is looking actually pretty good. To my mind, our quick move early this year, which was obviously very controversial and uncertain, was appropriate.  .  .  . As I said, I think our aggressive approach earlier in the year is looking pretty good, particularly as inflation pressures have seemed to moderate.

For some reason the policy was abandoned in late 2008.  The Fed began forecasting a path for aggregate demand that was clearly below their implicit policy goals.  They weren’t just ignoring market forecasts; they were ignoring their own forecasts.  And they did so even before rates had hit zero. Why?

When I talk to elite economists they tell me that reducing rates to zero a bit earlier would not have helped much.  OK, but even so why not do it?  And why not also do QE and forward guidance?  And why pay interest on reserves?  (The rate was significantly higher than 1/4% during November 2008.)

As of September 2008 I’d been basically fine with Fed policy for 25 years.  I generally had a “whatever” attitude.  Suddenly policy seemed obviously, shockingly, far off course.  And no one has been able to explain to me why I was wrong.  I’m still waiting for a good explanation for the Fed’s decisions—these transcripts certainly don’t provide one.


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33 Responses to “Transcripts post #1: Reasoning from price changes”

  1. Gravatar of Major_Freedom Major_Freedom
    23. February 2014 at 07:10

    But I am nonetheless struck by the lack of curiosity on this issue. The participants didn’t seem willing to even entertain as a hypothesis what we now know was the actual cause of these price changes, NGDP was falling of a cliff in the June to December period.

    But I am nonetheless struck by the lack of curiosity on this issue. The participants didn’t seem willing to even entertain as a hypothesis what we now know was the actual cause of falling NGDP, money holding was skyrocking in the June to December period.

    See what I did there? Where is the “curiosity” about the cause of the cause?

    It appears that “curiosity” only goes as far as one’s preferred policy prescriptions. Let us analyze the economy and get to the back of things, research and study the causes of the causes of the causes….but only so far as NGDP. Then we stop asking questions, because if we ask too many questions, we might not settle on NGDPLT after all.

  2. Gravatar of Major_Freedom Major_Freedom
    23. February 2014 at 07:25

    I propose a new reasoning flaw in economic thinking: Reasoning from a spending change.

    Just like we must not reason from a price change, so too must we not reason from a spending change. Reasoning from a price change is flawed because it doesn’t integrate the importance of spending. But reasoning from a spending change is flawed because it doesn’t integrate the importance of money holding and the crucial, heterogeneous effects on capital from changes in money holding.

    It is not the case that changes in NGDP growth rates are associated with equal percentage changes in micro level expenditures and wages. We saw that much of the rise in unemployment during the 2008-2009 period was concentrated in specific industrial sectors, which are themselves affected differently in response to inflation. The heterogeneous, relative changes underlying what MM treats as aggregate changes must be analyzed as well.

    Reasoning from a spending change leads to blindness to changes in the relative spending and relative pricing events. These relative changes are more important to economic coordination than aggregate changes. For the relative changes are the signals that individual investors utilize when making choices as to which among various alternatives capital and labor is allocated. These decisions of where among alternative investment options resources and labor are to be allocated are insanely critical. It is literally the difference between a sustainable economy and an unsustainable one.

    And yet MM totally overlooks it. It must overlook it due to focusing on aggregates, which of course masks the underlying variables making up the aggregates.

    Why is all this important? Because it explains why there are sudden shifts in demand for money holding. And, also as critical, inflation above market rates, even inflation to target a nice stable aggregate spending variable, adversely affect the very relative resource and labor allocations that are the cause of the sudden rises in demand for money holding that is the cause for NGDP falling!

    MM is woefully incomplete. It starts and stays at political force. It does not analyze the cause of changes in demand for money holding and hence the cause of changes in NGDP.

  3. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    23. February 2014 at 07:54

    Am I the only one having trouble getting a comment to register?

  4. Gravatar of Don Geddis Don Geddis
    23. February 2014 at 09:03

    MF(/Geoff): You remind me of this quote from Winston Churchill: “A fanatic is one who can’t change his mind and won’t change the subject.”

  5. Gravatar of Major_Freedom Major_Freedom
    23. February 2014 at 10:29

    Don Geddis:

    Cool story. Love to hear you talk about what you are reminded of when you hear or see certain things. It’s so incredibly interesting and something I would like to take time out of my day relishing in analysing.

    I wonder how willing you are to change your mind to agree with me, and how willing you are to change the subject away from NGDP and MM, towards Austrian theory.

    Oh that’s right, I remind you of yourself! That’s why you hate me. You hate yourself and blame me for it.

    There is a word psychologists use to describe what you are doing. Rhymes with Psychological Proshmection.

    Dude, like do you even see yourself type? I always try to remind my intellectual opponents to engage in at least some self-reflection. Seems like you’re so mentally traumatized that it is an absolute terror for you.

    Is anyone capable of responding with serious analysis? Or is the childish and vapid Don Geddis the best you got?

  6. Gravatar of Major_Freedom Major_Freedom
    23. February 2014 at 10:31

    Don:

    Perhaps if you start reading people other than legal Mafia dons, maybe you’ll find the power in yourself instead.

  7. Gravatar of josh josh
    23. February 2014 at 10:37

    Do they discuss money market funds in the minutes? If not, is it odd that they don’t?

  8. Gravatar of Jason Jason
    23. February 2014 at 12:15

    I argue here based on base expansion that the Fed had effectively been tightening since at least 2006:

    http://informationtransfereconomics.blogspot.com/2014/02/the-fed-caused-great-recession.html

    The AD shock of Sept 2008 could be thought of a rubber band that had been stretching slowly since at least 2006 and snapping back.

    Regarding the comment on Okun’s law: they seemed to say that Okun’s law was showing recession, but there are errors that may justify the status quo … I’m not sure they considered the errors could be in the other direction!

  9. Gravatar of Nick Rowe Nick Rowe
    23. February 2014 at 12:42

    Scott: “The real GDP numbers for the first half of 2008 have been revised sharply lower, and hence we now know the other data was more accurate.”

    BTW, was NGDP data also revised down?

    “If the Fed had ignored the RGDP data and focused on the more negative information, they might have behaved differently in the second half of NGDP.”

    Was that last “NGDP” a typo for “2008”??

  10. Gravatar of Dustin Dustin
    23. February 2014 at 12:48

    MF,
    Your first post directly supports Scott’s point!

    You see, increase demand for $ can lead to:
    -> decreasing rates
    -> decreasing NGDP

    However, increasing demand for money is not the only cause of decreasing rates. So assessing decreasing rates in a vacuum is nearly meaningless. When we see decreasing rates AND decreasing NGDP, there can be no question that the winds of an economic slowdown are nigh.

    Further, while it is interesting to navigate leftward into the causal chain and arrive at the conclusion that demand for $ is increasing, please realize that increasing demand for $ is not always a concern.

    The point of all this investigation is about action, policy decisions, the big ‘so what’… not an intellectual exercise to satisfy curiosities. Despite the multitude of various causes and effects, a rapidly decreasing, below target NGDP is basically, in itself, a concern and very meaningful call to action – ie, looser monetary policy!

  11. Gravatar of kt kt
    23. February 2014 at 13:13

    Nick Rowe, yes the NGDP data was revised down.

    This is how it looked back on 12 September 2008 (YoY, going back one year): http://tinyurl.com/kauwf3u

  12. Gravatar of Jacob A. Geller Jacob A. Geller
    23. February 2014 at 13:16

    Scott,

    To say that “the decline in commodity prices will help support domestic demand” is to confuse a movement along the AD curve with a shift in the AD curve, no?

    I.e., the idea of a demand-side recession is that the AD curve has shifted, hence movements along the AD curve are a symptom not a solution..?

  13. Gravatar of ssumner ssumner
    23. February 2014 at 13:22

    Nick, Thanks, I fixed the typo. kt answers your other question.

    Thanks kt.

    Jacob, Yes, that is a type of “reasoning from a price change. Confusing shifts in demand with movements along a demand curve.

  14. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. February 2014 at 14:55

    The monetary policy meetings of Reserve Bank of Australia Board (which does the work the FOMC does for the Fed) has only had its minutes published since 2007, but does so 2 weeks after the meeting.
    http://www.rba.gov.au/monetary-policy/rba-board-minutes/

    Just saying.

    Actually, not just saying. It means that the RBA gets informed outside comment on its reasoning way quicker. I guess it depends on whether you want to use the minutes as part of your information trawling or a-so-long-after it is pretend accountability.

  15. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. February 2014 at 14:58

    Suddenly policy seemed obviously, shockingly, far off course. There was clearly an elephant in the room. Was it the financial system?

  16. Gravatar of flow5 flow5
    23. February 2014 at 15:05

    You don’t have to trust real-gDp data. Besides, the data’s reported too far after the fact. But you must trust money flows (where roc’s in MVt = roc’s in nominal-gDp). And you can’t re-examine the data ex-post. The data’s impact can only be seen ex-ante (via distributed time lags).

    For a century the Fed has always inadvertently “covered up” their policy making errors. That’s why Joe Sixpack hasn’t lynched Bankrupt you Bernanke.

  17. Gravatar of ssumner ssumner
    23. February 2014 at 16:16

    Lorenzo, Good point about the transcript delay. The “elephant” was falling NGDP expectations. One way of visualizing the problem is that the Wicksellian equilibrium rate fell sharply due to the financial crisis, and the target rate was kept at 2%.

  18. Gravatar of benjamin cole benjamin cole
    23. February 2014 at 17:45

    I word-searched the transcripts for “unit labor costs”. Rare mention. Commodities all the time.
    In June, Fed staffer says they project unit labor costs to rise at 2 percent annually.
    What we have seen is ULC’s have risen by 1.7 percent since the first quarter…of 2007 that is.
    ULC’s play much bigger role in inflation than commodities…
    Maybe the FOMC’ers remember the Arthur Burns-oil shocks-inflation days…so they fixated on that…and at least two FOMC’ers—Plosser and Fisher—think about inflation obsessively, compulsively and fearfully.
    I would say the Fed’s failings are rooted in modern-day central bank culture and ossification…and btw why are transcripts secret for five years? Transparancy is the the first rule of democracy…

  19. Gravatar of Mark A. Sadowski Mark A. Sadowski
    23. February 2014 at 18:40

    Scott,
    Off Topic.

    Krugman pulls out the Euro Area scatterplot yet again.

    http://krugman.blogs.nytimes.com/2014/02/23/the-myth-of-german-austerity/

    February 23, 2014

    The Myth of German Austerity
    By Paul Krugman

    “Every once in a while I hear people trying to dismiss the overwhelming evidence for large economic damage from fiscal austerity by pointing to Germany: “You say that austerity hurts growth, but the Germans have done a lot of austerity and they’re booming.”

    Public service announcement: Never, ever make claims about a country’s economic policies (or actually anything about economics) on the basis of what you think you’ve heard people say. Yes, you often hear people talking about austerity, and the Germans are big on praising and demanding austerity. But have they actually imposed a lot of it on themselves? Not so much. Again, my euro area austerity versus growth plot for 2009-13:

    [Graph]

    Germany did less austerity than almost anyone else in the euro area.”

    This is the very same scatterplot Krugman used only a few days ago, with the change in the cyclically adjusted balance (CAB) from the October 2013 IMF World Economic Outlook as his measure of fiscal policy stance, and the change in RGDP between calendar years 2009 and 2013. There are 11 countries in his graph, and every single one of them is from the Euro Area. (All of the pre-2014 Euro Area members except Cyprus, Estonia, Luxembourg, Malta, Slovakia and Slovenia.) Thus all 11 countries have exactly the same monetary policy.

    Five of these countries have done less fiscal austerity than the US and the UK between 2009 and 2013: Austria, Belgium, Finland, France, and of course Germany. Whereas the US increased its CAB by 3.8% of potential GDP between 2009 and 2013, and the UK by 6.3% of potential GDP, Austria, Belgium, Finland, France and Germany increased their CABs by 1.2%, 1.1%, (-1.0%), 3.6% and 0.9% of potential GDP respectively.

    These five countries accounted for 58.7% of the 17-nation Euro Area NGDP in 2012. The Euro Area as a whole increased its CAB by 3.3% of potential GDP between 2009 and 2013. So rather than “The Myth of German Austerity”, perhaps the title of Krugman’s post should have been the “The Myth of Euro Area Austerity” (or at least the myth that the Euro Area has done more fiscal austerity than the US and the UK).

    And how about that much vaunted German economic boom? Since fiscal policy matters so much, surely Germany, as well as Austria, Belgium, Finland and France are all outperforming the US and the UK, right?

    Since the only sensible way to compare the effects of monetary and fiscal policy on aggregate demand (AD) is by actually looking at AD (NGDP), here’s NGDP in all of those nations, plus the Euro Area as a whole, and Japan, each indexed to their pre-recession peak. Note that Japan’s CAB *decreased* by 1.8% of potential GDP between 2009 and 2013, so both it and Finland actually had *expansionary* fiscal policy between 2009 and 2013:

    http://research.stlouisfed.org/fred2/graph/?graph_id=162305&category_id=0

    As of 2013Q3 NGDP is 13.9% and 10.70% above pre-recession peak in the US and the UK. This compares to 10.3%, 9.4%, 3.4%, 6.3% and 10.67% for Austria, Belgium, Finland, France and Germany respectively, 3.3% for the Euro Area as a whole and (-6.9%) for Japan. So NGDP grew more in the US and the UK compared to the Euro Area members that did less fiscal austerity than they did (at least among Krugman’s group of 11), and Japan, which had a more expansionary fiscal policy than any of these nations, was the only one whose NGDP actually fell (of course things are beginning to turn around now in Japan, thanks to better monetary policy).

    So there’s not much sign of either fiscal austerity, or of an economic boom, in the core Euro Area. It would seem that the missing ingredient is better monetary policy, not more expansionary fiscal policy.

  20. Gravatar of TravisV TravisV
    23. February 2014 at 18:52

    Noah Smith:

    Japanese inflation, properly measured, is only about 0.7%

    http://noahpinionblog.blogspot.com/2014/02/japanese-inflation-isnt-as-high-as-you.html

  21. Gravatar of Tom Brown Tom Brown
    23. February 2014 at 21:08

    O/T: Does anybody else get an “infolinks” popup at the bottom when visiting Sumner’s page for the first time? I had it happen on an old laptop and I figured it was malware, but I could never get rid of it. But now it’s happening on a new laptop. Only at themoneyillusion.com, nowhere else.

  22. Gravatar of Benjamin Cole Benjamin Cole
    23. February 2014 at 21:45

    Tom Brown-

    I get the infolinks. First I only got it on my smartphone. Now on my Apple mini too.

    I dunno anything about computers though and less about the inter-webs.

  23. Gravatar of Benjamin Cole Benjamin Cole
    23. February 2014 at 22:16

    Lorenzo From Oz-

    “The monetary policy meetings of Reserve Bank of Australia Board (which does the work the FOMC does for the Fed) has only had its minutes published since 2007, but does so 2 weeks after the meeting.
    http://www.rba.gov.au/monetary-policy/rba-board-minutes/

    Exactly! Your comment about the central banks then gets outside commentary is dead-on-solid-perfect.

    There are many reasons why transparency in government is a plus, aside from the fact it is ethically and morally correct. Feedback is a key feature. Secret government is always a bad idea.

    There are “Fed bubbles”—the ones inside which they operate!!

    You have made perhaps the most important comment in web history.

  24. Gravatar of Saturos Saturos
    23. February 2014 at 22:36

    Good post by Noah Smith on Japanese inflation numbers: http://noahpinionblog.blogspot.com.au/2014/02/japanese-inflation-isnt-as-high-as-you.html

  25. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. February 2014 at 23:01

    Scott: So those running the Fed noticed the financial crisis but did not see its implications for monetary policy. It goes back to why narrow inflation targeting is like the gold standard — it focuses on the value of money without taking responsibility for income expectations.

    Ben: Thanks for the hyperbole :)

  26. Gravatar of Rodrigo Escalante Rodrigo Escalante
    24. February 2014 at 06:00

    Jim Grant on the Fed, saying intervening during the recession only made things worse and artificially suppressed interest rates.

    It sounds a lot like the liquidationist theory employed by the fed during the great depression.

    http://www.cnbc.com/id/101439641

  27. Gravatar of ssumner ssumner
    24. February 2014 at 06:08

    Mark, Great comment, I’ll do a post on that. BTW, I did a post on Econlog discussing your earlier comment on the scatterplot diagram.

    Travis and Saturos, Thanks, I’ll do a post.

    Lorenzo, Good point, but in fairness the gold standard didn’t even do a good job on the value of money–if defined in terms of purchasing power.

    Rodrigo, Yes, it sounds that way.

  28. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. February 2014 at 15:00

    Scott: Indeed–inflation targeting provides much better short-run stability since prices will move about the rate of the actual inflation target.

    The big difference between the 1873-1913 gold standard and the interwar gold standard was in 1873-1913, gold demand was remarkably stable: gold production relative to output growth drove prices. (Rather like old monetarism’s take on the stability of velocity.)

    The creation of the Federal Reserve created a much more dominant holder of gold than had existed pre-December 1913. So, perhaps that was another way the Great Depression was the Fed’s fault–creating a much more oligopolistic gold market so that the actions of one or two players (say the Bank of France abetted by the Federal Reserve) could dramatically shift gold demand.

    Alternatively (though not either/or) the pre-war Bank of England acting as primus inter pares acted to keep gold demand stable. Which was possibly somewhat easier in a more dispersed gold market.

  29. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. February 2014 at 15:03

    Hmmm. That probably should be “gold demand stable relative to gold production and goods and services output”. Working from G=gPy. (The gold standard alternative to M=kPy.)

  30. Gravatar of TravisV TravisV
    24. February 2014 at 15:26

    Lorenzo from Oz,

    See here: http://moneymarketsandmisperceptions.blogspot.com/2014/01/monometallism-as-winners-curse-my.html

    Jim Caton thinks the bimetallic gold and silver standard was pretty darn stable. Problems with instability originate with governments discouraging the use of silver.

  31. Gravatar of Major_Freedom Major_Freedom
    24. February 2014 at 16:49

    Dustin:

    “MF, Your first post directly supports Scott’s point!”

    “You see, increase demand for $ can lead to:”

    “-> decreasing rates”
    “-> decreasing NGDP”

    “However, increasing demand for money is not the only cause of decreasing rates. So assessing decreasing rates in a vacuum is nearly meaningless. When we see decreasing rates AND decreasing NGDP, there can be no question that the winds of an economic slowdown are nigh.”

    I didn’t say or imply that increased demand for money is the only explanation for decreased rates. I also didn’t assess decreased rates in a vacuum.

    Not sure what else to say in response. It’s rather clear there has been some kind of misunderstanding.

    “Further, while it is interesting to navigate leftward into the causal chain and arrive at the conclusion that demand for $ is increasing, please realize that increasing demand for $ is not always a concern.”

    It should never be a concern. It’s a voluntary activity, and hence has 100% positive effects, even if those effects FEEL bad. Not all things that feel bad, are bad. It probably felt really bad for the candlestick makers to lose profits and employment once electricity became competitive, but that doesn’t mean their pain was evil. It is a part of coordination, progress, and peaceful exchange.

    So is changing demand for money.

    “The point of all this investigation is about action, policy decisions, the big ‘so what’… not an intellectual exercise to satisfy curiosities.”

    It’s both. But the important thing is that you can’t act rationally and reasonably if you don’t engage in the intellectual exercise part.

    Thinking is an action. Using force is not superior to doing nothing. Doing nothing is better than doing something destructive.

    “Despite the multitude of various causes and effects, a rapidly decreasing, below target NGDP is basically, in itself, a concer”

    No it isn’t. It is a regulative, coordinating phenomenon based on voluntary exchange and abstentions from exchange. The cancer is inflation, for it is grounded on violence, and does not help society.

  32. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. February 2014 at 21:02

    TravisV: Milton Friedman came to have the same view. It certainly strikes me as a defensible proposition.

  33. Gravatar of ssumner ssumner
    25. February 2014 at 12:04

    Lorenzo, Yes, that seems reasonable.

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