With all of the recent supply shocks, it’s increasingly obvious that inflation is the wrong target. Today I came across two articles advocating NGDP targeting. Ramesh Ponnuru has a piece in Bloomberg and Norbert Michel has a piece in Forbes.

In a recent article, Larry Summers links to this frightening graph showing soaring nominal wage growth:

He’s right, the Fed’s recent mistakes make a recession more likely.

There’s been a lot of discussion of inverted yield curves. Yield curve inversion implies a market forecast of lower future nominal interest rates. It can occur from expectations of slower real growth, slower inflation, as well as a number of other factors. The simplest model is to assume that yield curve inversion predicts slower NGDP growth.

On some occasions, such as 1966, 1981, and today, you would like to see substantially slower NGDP growth, even at the risk of recession. In other cases, a sharp slowdown in NGDP is undesirable, and a sign that monetary policy is too contractionary.

NGDP growth was over 11% over the past year, and will continue at well above trend for at least a few more quarters. I’d like to see NGDP growth fall below 4% in 2023, but not sharply below 4%. That’s much harder to do when the Fed has no credibility, Unfortunately, their recent abandonment of FAIT has cost them a lot of credibility.

It’s like the farmer said to the lost motorist, “First of all, I wouldn’t start from here.”

This Bloomberg headline caught my eye:

Powell Treads Tricky Path in Saying Wages Are Rising Too Fast

He’s right. Here’s how Powell should frame the issue:

1. Rapid real wage growth is good; it leads to higher living standards for average Americans.

2. Rapid nominal wage growth (relative to productivity growth) is bad, it generally implies high inflation.

3. The best way to promote higher real wages is through economic reforms that boost productivity.

Given our rate of productivity growth, the Fed needs to get nominal wage growth down to no more than 3%.

PS. Check out this FT headline:

Jay Powell channels his inner Paul Volcker with tough stance on US inflation

Tough? Did Volcker end the Great Inflation by raising interest rates from 0% to 0.25%?

Off topic, how about this FT headline and subhead:

Why I should have listened to Garry Kasparov about Putin

The chess grandmaster was dismissed when he warned about Russia. But he was right

Over the past decade, I’ve also noticed a lot of westerners in denial about Putin. Some even seem to idolize him.

Former US president Donald Trump posited that Russian president Vladimir Putin’s decision to invade Ukraine was driven by a desire to recreate the Soviet Union in which there was “a lot of love”.

So the war is Putin’s valentine to the Ukrainian people?

By “good people”, do you mean fascists?

I warned about him two years ago. (And read the comment section to that post.)

PS. He’s also an antisemite.

PPS. You want me to comment on the Fed? That’s what Econlog is for.

Putin must be proud of the way that Trump is no longer making any attempt to hide his love of authoritarianism:

Bye bye civil service system. And don’t forget to purge all the state election certification officials. Especially that guy in Georgia who refused to come up with the extra 10,000 votes that Trump demanded.

And what impeccable timing for Trump. Propose abolishing civil service protections right as Putin is purging his government of the “deep state”, aka “people who oppose his insane policies”.

Meanwhile the president’s son is spreading Putin’s propaganda:

“It’s not a “war,” it’s a much needed cleansing,” wrote a member of a Telegram group called “Patriot Voices” that is popular with supporters of Trump. “Ukraine has a ton of US govt funded BioWeapons Labs that created deathly pathogens and viruses.”

Television pundits and high-profile political figures have helped spread the claim even further. Fox News host Tucker Carlson devoted segments on his shows on Wednesday and Thursday to promoting the conspiracy theory. On Wednesday, Donald Trump Jr. said conspiracy theories around the labs were proven to be a “fact” in a tweet to his 7.3 million followers.

Can’t wait until Trump’s “much needed cleansing” of the US in 2025. Should be fun.

Francis Fukuyama is more optimistic:

The invasion has already done huge damage to populists all over the world, who prior to the attack uniformly expressed sympathy for Putin. That includes Matteo Salvini, Jair Bolsonaro, Éric Zemmour, Marine Le Pen, Viktor Orbán, and of course Donald Trump. The politics of the war has exposed their openly authoritarian leanings.

Really? Who’s the current leader in the race for the 2024 GOP presidential nomination? Perhaps Americans actually favor an authoritarian leader. Not most Americans, just the minority necessary to elect Trump in our “democratic” system of government.

[BTW, I’ve criticized many of those authoritarians in my blog, along with jerks like Putin and Tucker Carlson. I’ve said Germany should not have shut down its nukes. I’ve said Russia was a bigger threat to world peace than China. I’ve favored a carbon tax. Dare I say, “I told you so”?]

And speaking of Tucker:

And people say that I’m a CCP stooge.

I’m starting to think that calling the US a banana republic is an insult to Honduras.

The media gives the impression that almost the entire world is opposed to the Russian invasion of Ukraine. But is that true?

The facts are clear:

UNITED NATIONS — The U.N. General Assembly overwhelmingly condemned Russia’s invasion of Ukraine Wednesday and called for its troops to immediately and completely withdraw, as Moscow’s military bore down on several Ukrainian cities with airstrikes and troops.

Of the 193 member states, 181 participated in the vote. Of those, 141 countries supported the resolution condemning Moscow and five were against it – including Russia and a tiny group of its allies — Belarus, Syria, North Korea and Eritrea. Thirty-five countries abstained, but their numbers do not affect the two-thirds majority needed for adoption.

Unfortunately, only about half of the world’s population live in countries that condemned Russia’s invasion in the recent UN vote (yellow regions).

The media is Eurocentric, which is why it seems like there is overwhelming opposition to Russia. If only that were true.