“A wide range of information”

Changes in aggregate demand impact housing, retail sales, industrial production, business investment and exports.  Those are all components of RGDP.  Aggregate demand also affects prices.  Both RGDP and prices are components of NGDP.  So in a sense NGDP is the most comprehensive measure of AD.  It’s the total dollar value of all spending on all domestically produced final goods and services.  Today the Fed moved away from using unemployment as a policy benchmark, and towards … well you decide what they are moving towards:

The Fed on Wednesday reaffirmed its plan to keep short-term rates low to help support the economy. But it no longer mentions a specific unemployment rate that might lead it eventually to raise short-term rates. The Fed says instead it will monitor “a wide range of information” on the job market, inflation and the economy before approving any rate increase.

Hmm, what single variable contains the widest range of information?

By the way, both the Fed and the BoE have come under criticism for abandoning their unemployment rate thresholds.  I half agree and half disagree.  I certainly believe that the unemployment rate is something that central banks should NOT be targeting.  However I’m also bemused by the specific criticism—that the Fed and BoE had to abandon the thresholds because right after the thresholds were adopted the unemployment rate fell much faster than anyone expected.  Wasn’t the purpose of forward guidance to make the unemployment rate fall much faster than it had been falling?  So if it does exactly that, and they are able to shift to new and more ambitious goals, is that really a policy failure?  Especially if this faster than expected fall in unemployment is associated with an acceleration in RGDP growth during a period of fiscal austerity?

With failure like that who needs success?

PS.  Obviously I would have preferred they adopt more explicit guidance, and hence agree with Narayana Kocherlakota’s dissent.

PPS.  Did Yellen say anything to cause the secondary dip in stock prices?




44 Responses to ““A wide range of information””

  1. Gravatar of Willy2 Willy2
    19. March 2014 at 13:25

    The FED only watches one gauge when it makes a decision whether or not to raise the FFR: Short term rates. All the rest is Kabuki for the rubes.

  2. Gravatar of Willy2 Willy2
    19. March 2014 at 13:37

    The market was hoping for more stimulus.

  3. Gravatar of cthorm cthorm
    19. March 2014 at 14:00

    Rates moved up, stocks were basically flat (insignificantly down). Unless you’re looking at the Fed’s announcements through a Market Monetarist lens, they gave mixed signals today. ST rates might be raised in 2015, $10b tapering of QE, removing the unemployment threshold. With Yellen & Stan Fischer leading they’re not going to prematurely tighten policy.

    The Fed is doing the right thing by removing the bugaboo of the 6.5% unemployment threshold, so the mechanics come into question.

    The Fed is doing the “wrong” thing by reducing the clarity of their objectives. But their objective was a poor one in the first place. They moved a little away from rules and toward discretion today, but the Fed moves slowly. I hope they introduce a new ultra-clear definition of “wide range of information” at the next meeting. NGDP is the obvious choice.

  4. Gravatar of Ryan Fitzgerald Ryan Fitzgerald
    19. March 2014 at 14:36

    The sharp drop in stock prices was related to the a question posed to Yellen about the language in the FOMC statement that noted there would be “considerable time” between the end of asset purchases and the first rate hikes. Yellen’s response was a highly qualified (depending on the economy) “six months or that type of thing” which was 6 months to a year earlier than the market was anticipating.

    It was a strange press conference from Yellen although she was considerable more comfortable than she was at the congressional questioning. Dovish in tone and in her sentiment towards low inflation and high unemployment, but hawkish when asked to give numerical examples.

  5. Gravatar of Al Al
    19. March 2014 at 14:44

    I don’t know about the timing, but various media sources attribute the decline to this quote:

    “Once you do wind down bond buying program, could you tell us how long of a gap we might expect before the rate hikes do begin?”
    “So the language that we used in the statement is considerable period. So I, you know, this is the kind of term it’s hard to define. But, you know, probably means something on the order of around six months, that type of thing.”

  6. Gravatar of Major_Freedom Major_Freedom
    19. March 2014 at 15:50

    “Changes in aggregate demand impact housing, retail sales, industrial production, business investment and exports.”

    Changes in housing, retail sales, industrial production, business investment and exports, impact aggregate demand.

    It is individual exchanges which make up all economic aggregates. Aggregates are composed of individuals, but individuals are not composed of the aggregates.

    When you imagine or when you perceive aggregate demand to have changed, you are in fact imagining or perceiving individual choices and actions to have changed. If I spend less today than yesterday on food for example, then ceteris paribus I have brought about a reduction in aggregate demand. But it is not true that aggregate demand changing is what caused the change in incomes of food sellers. I changed it, and the change in aggregate demand is a consequence of my individual choice and action. Even if there is a counterfeiter, who prints and spends more on spying equipment, which happens to offset my reduction in spending and result in no change to aggregate demand, it is still the case that the changes to food seller income and changes to the spying equipment seller incomes, was due to individual choices and actions.

    The same is true for myself plus every other individual who is alive and partakes in the division of labor. EIt is our choices is what determines the incomes of particular industries. If there is a counterfeiter, and via its printing it offsets any decline in spending in for example medicine, with increases in spending in for example drones and machine guns, then it is still the case that the aggregate is a function of individual choices and actions in “housing, retail sales, industrial production, business investment and exports.”

    To reiterate, it isn’t changes in aggregate demand that affects “housing, retail sales, industrial production, business investment and exports.” The change in aggregate demand is constituted by changes in “housing, retail sales, industrial production, business investment and exports.”

    No counterfeiter can overturn this.

  7. Gravatar of Tommy Dorsett Tommy Dorsett
    19. March 2014 at 15:56

    The front and back end of the yield curve came up in roughly equal proportions and tips spreads were down a tad but not by much. Yes, stocks sold off but from nearly record levels, but the market did not close on the lows.

    There was a weird phrase in the Statement about the panoply of indicators they will assess in deciding when to remove ‘accommodation’ which included ‘financial developments’. There’s nothing overtly wrong with that, but the market could have taken it as a nod to the Fischer (Dallas version), Plosser, Lacker, Stein bubble popping cabal who now wants the FOMC to pursue a triple mandate. Just like 1928-29.

    Yellen may have reinforced an optimism/subtle hawkishness on the outlook by rightly pointing out the vast swathe of labor market indicators were improving, perhaps unevenly, but directionally. But she want to great pains to say that any prospective action to ‘tighten’ would be contingent on hitting the inflation target.

    All in, Grandma Yellen did pretty well today, I thought. Clear and concise with 75 IQ points on the average press person and 150 IQ points on the average Congressional dolt. Not bad for government work.

  8. Gravatar of benjamin cole benjamin cole
    19. March 2014 at 16:07

    The Fed again fails the transparency and clarity test.
    In a democracy, meetings are open and policy and intentions clear.
    What part of simple democratic standards did the Fed meet?
    The Fed’s legacy and culture of secrecy and obscurantism lives on.

  9. Gravatar of ssumner ssumner
    19. March 2014 at 16:54

    Willy, Either you have a very subtle sense of humor, or . . .

    Thanks Ryan and Al.

    Ben, Well said.

  10. Gravatar of Ricardo Ricardo
    19. March 2014 at 18:07

    RE: Did Yellen say anything to cause the secondary dip in stock prices?

    Here’s a short and to-the-point article about “Why equities sold off despite a dovish Fed”:


  11. Gravatar of Major_Freedom Major_Freedom
    19. March 2014 at 18:10

    Benjamin Cole:

    “In a democracy, meetings are open and policy and intentions clear.”

    “What part of simple democratic standards did the Fed meet?
    The Fed’s legacy and culture of secrecy and obscurantism lives on”

    By that criteria the government as a whole has always failed the standard.

    Democracies arise on the basis of violence from 51% of the population.

    If 51% want to be secretive, then democracy allows it.

  12. Gravatar of Benjamin Cole Benjamin Cole
    19. March 2014 at 19:25

    Here is the question, and I not trying to be cute.

    This is a serious question:

    If you ask the FOMC, which do you prefer,

    1. About 1.5 percent inflation and 1.5 percent real growth for the next 10 years, or

    2. About 3 percent inflation and 3 percent real growth for the next 10 years.

    What would be the answer?

    What would the official answer, and what would be the real answer?

    Officially, scenario No. 1 hits FOMC targets….

    The real answer is the same I think….that is FOMC do not want inflation above about 1.50 percent or so….and as long as there is some real growth, then okay…

    The upshot: The FOMC and much of the economics profession has lost its moorings in some sort of inflation-hysteria…or maybe it is a dementia…or perversion…call in the psychiatrists, because this is so wrong…..

  13. Gravatar of Benjamin Cole Benjamin Cole
    19. March 2014 at 19:37

    Major Freedom:

    Technically, you are correct, and this is the reason for constitutional democracies..,we can hope the constitution protects individual liberties and rights…

    But, in a working democracy, we should expect and demand that to the fullest extent possible all meetings of public bodies are sun lighted, and that the policies of public bodies are clear and easily understood…

    The onus for justifying secrecy should always fall on those who want secrecy…that is to say, any public meeting is always and indisputably open, unless somebody can present a clear and present danger why not…

    I see no clear and present danger in having public FOMC meetings.

    I invite anyone to present to me a clear and present danger…

    I do see advantages to public FOMC meetings, such as a better informed public and near guaranteed simultaneous delivery of information to markets.

    And, I invite anyone to explain to me what is Fed policy right now…if I don’t understand, I bet most people do not understand….

    But why should I understand? I am just a citizen and taxpayer and a guy trying to make a living in this economy,…why should anyone clue me in?

  14. Gravatar of Major_Freedom Major_Freedom
    19. March 2014 at 21:10


    I think “clear and present danger” is technically speaking the most likely standard that is actually in the minds of those who might want secrecy the most. The clear and present danger of course is not necessarily violence, but of losing wealth and status.

    This of course is always something the central bankers, Congress, and the entrenched powers of government face, everyday. The desire for secrecy is to prevent openness from reducing or eliminating their wealth and status.

    If the ideology is that 51% can commit violence against the 49%, not in full totalitarian force but somewhat mitigated by “constitutional” restraints, it does not eliminate the very significant, positive, and effectual remaining ideology of pro-violence and corruption. An ideology of small, constitutional government is still an ideology of “I will threaten you with violence and take what is yours”.

    If in a constitutional democracy 51% want secrecy and corruption, then what?

  15. Gravatar of Travis Allison Travis Allison
    19. March 2014 at 21:29

    I think a couple of reasons for the market fall.

    1) I think Yellen was expected to be more dovish than Bernanke, but really isn’t in practice.

    2) Yellen was asked whether the Fed would keep rates low even when unemployment is at 5.4% and inflation is at 2%. She didn’t answer the question. So I think it’s pretty clear that 2% is considered an upper bound for inflation.

    3) The Fed is pretty complacent about the economy and it will take a lot for them to turn around and increase purchases.

  16. Gravatar of TravisV TravisV
    19. March 2014 at 21:36

    Benjamin Cole,

    Look on the bright side!

    If inflation averages 1.0% to 1.5% over the next 10 years, that’s probably adequate. NGDP growth should average at least 3.0%, which in my opinion is enough to deal with the problem of sticky wages.

    The insights of Sumner, Woodford, Romer and Carney are resonating with more and more people. As a result, central banks are becoming more and more comfortable with forward guidance and unconventional monetary policy.

    That’s my guess for why the market has done so well lately. I think the market is correctly sensing a lower and lower probability that NGDP will be allowed to fall any time during the next ten years……

  17. Gravatar of TravisV TravisV
    19. March 2014 at 21:49

    Benjamin Cole,

    Look on the bright side:

    Imagine how much lower U.S. NGDP growth would have been if these things hadn’t happened……




  18. Gravatar of TravisV TravisV
    19. March 2014 at 22:06

    See more Benjamin Cole pessimism here:


    Despite Ben’s pessimism, I still think the real value of the S&P 500 will be far higher ten years from now than it is today.

    Lars Christensen wrote a very insightful comment about the Evans Rule and the critical importance of forward guidance:


    “The de facto introduction of the Evans rule in the US in September 2012 worked. There is no doubt about that in my mind. As a result the fear of a black swan event has clearly gone down. The markets no longer think that every small hiccup will blow up the global financial system and the global economy. Just think of the US government shutdown – nobody else than partisan political pundits ever thought of it as any particular risk to the US economy. And surely enough the US economy continues to expand despite of fiscal tightening in the US.”

  19. Gravatar of Benjamin Cole Benjamin Cole
    20. March 2014 at 00:18


    I don’t take meds, but maybe I should. Well, maybe any Fed-watcher needs at least a stuff drink….

    I hope you are right, and that the S&P is much higher in 10 years than now.

    The lesson of Japan is otherwise.

    I hereby propose the Benjamin Cole Macroeconomic Rule: Inflation and Real Growth below the one-handed digit range (minus the thumb), will tend to merge.

    You read it here first, and dude I like it.

  20. Gravatar of Benjamin Cole Benjamin Cole
    20. March 2014 at 00:21

    Major Freedom:

    Okay, I’ll bite (against my better judgement):

    If a constitutional democracy is not a good form of government, what would you prefer?

    A jodhpuracracy?

  21. Gravatar of Willy2 Willy2
    20. March 2014 at 00:37

    @Scott S.: No, I am NOT joking or kidding.

    The FED FOLLOWS the market rates. It does not determine the rates. And I have a chart to prove it.

    The green line (91 day T-bill rate) moves lower first and then the FED follows with the FFR & FED’s discount rate with a lag.

    Source: http://www.martincapital.com

    And remember: Tapering = less liquidity.

  22. Gravatar of Saturos Saturos
    20. March 2014 at 04:26

    Always good to see Eliezer Yudkowsky promoting NGDPLT, even if it is amidst a morass of self-promotion (but that’s what Facebook’s for): https://www.facebook.com/#!/photo.php?fbid=10152307931189228&set=a.10150565386269228.406871.509414227&type=1&stream_ref=10

  23. Gravatar of ssumner ssumner
    20. March 2014 at 04:48

    Ben, Of course the Fed would probably say there is no long run trade-off.

    Travis Allison. On the other hand she would not answer that question regardless of what she believes.

    Willy, I hate to puncture your ballon, but 91 day yields are a forecast of fed funds rates. So you’d expect them to move first regardless of the direction of causation.

  24. Gravatar of Morgan Warstler Morgan Warstler
    20. March 2014 at 04:50


    The answer is a Republic, with a constitution that pushes rights to the states, and an non-Parlimentary style of Federal Govt.

    Which is what we are. Those things listed above, which are part and parcel of America’s cowboy capitalism culture are THE REASON why our country is the global super power.

    States can be Hyper-Democracies. They are welcome to have their own currency even.

    But states should be able to suffer wildly for their mistakes compared to other states successes.

    Our system ought and should be set up so that states with failed policies find themselves adopting the policies of the states having success.

    It should not be determined by DC.

  25. Gravatar of ssumner ssumner
    20. March 2014 at 04:54

    Excellent. I wonder who was the first person to publish that sort of stream of consciousness. There’s an example in Murders in the Rue Morgue.

  26. Gravatar of Willy2 Willy2
    20. March 2014 at 05:26

    Nonsense. At the time of the crash of 1873 short term rates also went down to almost zero. And in those days there wasn’t a FED around. So, how is that going to explain the fact these rates “predicted” the FFR ?

    In 2006 Greenspan was asked why the FED had left the FFR so low for so long (from 2002 up to may 2004). The reply was that it wasn’t the FED who did that, it was the market that did that.

  27. Gravatar of TravisV TravisV
    20. March 2014 at 07:40

    James Caton on Brad DeLong:


    Brad DeLong needs to be more imaginative.

    My guess is the market believes that if inflation suddenly “surged” to 3.0%, then the Fed would quickly increase interest rates on excess reserves…..

  28. Gravatar of TravisV TravisV
    20. March 2014 at 08:25

    Prof. Sumner argues that expansionary money is positive-sum and not zero-sum.

    However, Bank of America, Citigroup and SunTrust seemed to disagree yesterday…..

    “Banks and life insurers welcome hawkish Fed lean”


  29. Gravatar of Major_Freedom Major_Freedom
    20. March 2014 at 08:49


    Since monetary “policy” is backed by lethal force for non-compliance, which prevents the best from every individual from being manifested, it is therefore not only a zero sum game (in the short run) but is a net negative for everyone in the long run. We are all deprived of the standard of living we could have had if past generations and current generations of people were not exploited by (state and civilian) violence and coercion.

    For some reason, those partial to central banking and statism in general, who are presented with ideas of peace based regulation and enforcement of protection, have a learning disability to the point where they cannot even distinguish between intervention and non-intervention, between hampered and unhampered economic calculation, and, in general, between free market capitalism and socialism.

    Apparently being socialist in either money, education, healthcare, roads, or protection services, or some combination of these, does not prevent some of you here from considering yourselves as pro-laissez faire. It is really quite astonishing.

  30. Gravatar of Major_Freedom Major_Freedom
    20. March 2014 at 08:52

    “Pragmatic libertarian” is a euphemism for “Non-libertarian libertarian.”

  31. Gravatar of TravisV TravisV
    20. March 2014 at 09:16


    I’m glad that you’re brighter than one Austrian friend of mine. He can’t even grasp the positive correlation between NGDP and nominal interest rates.

    Can you see how guys like him and Peter Schiff make your point of view look bad?

  32. Gravatar of TravisV TravisV
    20. March 2014 at 09:19


    I’m actually curious what you think are the most critically-misguided flaws with Sumner’s model of the way the world works. “Oh man, Sumner is a simpleton and clearly hasn’t even considered ____. If he had, then he’d grasp that ____.”

    Also, I don’t think you fully read this genius analysis he wrote:


    You should give it far more consideration. Toward the end, notice that he’s very charitable to the Austrian interpretation…..

  33. Gravatar of TravisV TravisV
    20. March 2014 at 09:26


    See this analysis by Peter Schiff:


    Notice that the piece fails to explain to the reader the critical difference between demand-side deflation and supply-side deflation.

    Do you think Schiff (1) doesn’t understand that critical distinction or (2) intentionally leaves his readers in the dark in an effort to mislead them?

  34. Gravatar of Major_Freedom Major_Freedom
    20. March 2014 at 11:48


    I don’t think it takes much mental powers to know that inflation that results in more spending on final goods will, ceteris paribus, increase revenues, hence profit rates, and hence interest rates (I hold that interest rates are generally determined by profit rates). So we see a positive correlation between NGDP changes and interest rate changes.

    But like most things in economics, it isn’t the only factor that affects interest rates. If the inflation enters the economy via the lending markets, then there will be a downward pressure on interest rates in addition to any other pressures from other sources. So we might see rates decline because NGDP is declining AND because the inflation the Fed is engaging in, is entering and hence affecting the loan markets.

    I don’t pay much attention to the debate on whether low nominal rates means money is “tight” or “loose.” All those debates are really about is whether a debater believes money should be printed faster or if it should be printednslower than what is currently the case. Those who want more say “money is tight” and those who want less say “money is loose.”

    I prefer these opinions to be constrained and encouraged through market forces in money production, which of course requires money to be allowed to be privatized. Then profit and loss calculations can apply to money production itself.

    You asked what I consider to be the biggest flaw in Sumner’s theory of how the world works. Please note that his theory is not merely a theory of how the world works. His theory includes, indeed implies, a normative framework. That normative framework includes “Initiating violence and coercion against innocent people is moral if the end goal is NGPLT.”

    Flaws of MM:

    1. Does not address the cause(s) for why it is that we see occasional periods of time where so many people would find it in their interests to reduce their spending and hold onto their money earnings for longer than in the recent past. Indeed, in a post this past week, Sumner claimed there is no cause.

    2. Does not incorporate, and in places is inconsistent with, economic calculation. It all has to do with theory of money. Sumner, like the ancients, saw money as a sort of lifeblood, where to more there is, within certain limits, the better off people are. He sees money as a “flow” that “oils” the economic “machine”.

    In fact, money in a division of labor society is a tool of calculation. The quantity isn’t what is important. It is how well it is serving as a medium of exchange. The best management of money is, of course, that which is itself constrained to profit and loss calculations. Socialist management makes that impossible. Money will hamper calculation if it is not market driven.

    3. Far too narrowly focused on aggregates, and ignorance over micro economics is covered up by the professed belief that macro is “more important anyway.” MM theory is blind to individual action. It reasons from price and spending changes. Importantly, it fails to include self-reflective analytics which would have long ago exposed to its proponents various theories such as inflation making wages stickier to the poont of being a noticable barrier to recovery rather than one of many normal, every day “frictions” of human life in contradistinction to demigod life of no time or learning or trial and error.

    4. MM theory requires, takes for granted, advocates for (however you want to say it) threats of violence against innocent people. This is its most important flaw.

    5. Apart from MM theory proper, there are epistemological flaws. Heavily dependent on self-contradictory philosophy of Richard Rorty. Boils down to the expression “Objective truth and knowledge for me, but subjective opinions and relativism for thee.” We see it in actual comments like “Every claim to truth is contingent and relative…except NGDPLT.” There is also a head in the sand mentality, in such claims as “Money as defined by aggregate money supply was not loose during the 1920s because the Fed wasn’t tracking it at the time, thus too much money during the 1920s cannot be blamed for the subsequent stock market bubble and crash.” (paraphrased)


    The heuristic rule I go by is if and when people propose violence as a solution to complex social problems, there are necessarily flaws in their reasoning. I don’t question their desire to do good (I accept the Socratic principle that humans cannot purposefully do evil intentionally).

    Re: Schiff…

    Bernanke views all price deflation as something to avoid. Thus he did not understand the difference. Almost every Keynesian doesn’t understand the difference. Price deflation is viewed by the general public as at least scary and ominous. There is a reason for this. The mainstream believes it. Schiff is not alone. You have to include others in that camp.

  35. Gravatar of Edward Edward
    20. March 2014 at 12:09


    It’s useless to try and discuss things with Major Freedom. Absolutist Fanatics like him cannot be reasoned with. Believe me I’ve tried.

  36. Gravatar of Major_Freedom Major_Freedom
    20. March 2014 at 12:30


    What you propose to me is not reason, but violence.

    You’re right, you cannot convince me to support violence. It is a useless endeavor. You will never get me to agree with you as long as your ideas and “solutions” are calls for guns to be pointed at people.

    You want an intellectual sanction that I will not give to you. That is the only reason you are “frustrated” with debating me.

    Jyst put yourself in my shoes, the way I do with yours. I cannot reason with you as of now because you don’t want reason to be the tool used. You want guns to be the tool. And yet I do not cease engaging arguments and debates, because I believe it’s only a matter of time before you recognize your own beliefs, and others wherever I encounter them, to be violent.

    I notice that you are trying to convince TravisV to ignore. You are doing that because you are afraid TravisV will “convert” to peace and understanding. Sumner does the same thing. You people are scared of being human and living among humans. Your a priori approach is a Hobbesian fear of death amd general distrust of humanity (yourself).

    I am more than willing to actually reason with you in order to solve social problems. That means peaceful solutions. Can you do the same? Are you willing to cease calling for guns, and instead contribute intellectually? Any moron can believe “Initiating violence in THIS way can work.” It’s a lot more difficult to think of a peaceful solution. I am looking for those people all the time in the statist trenches.

  37. Gravatar of TravisV TravisV
    20. March 2014 at 12:31


    I read everything you wrote above and couldn’t find any huge flaws with Sumner’s understanding of the way the world works.

    You just object to his prescriptions because they violate your absolutism. I don’t think there’s anything more to it than that.

  38. Gravatar of mpowell mpowell
    20. March 2014 at 12:33

    Another way to think about the unemployment target is that it was a specific way for the fed to indicate that they were serious about keeping policy loose, even if the economy picked up a little bit. Now that we are approaching 6.5% unemployment and they want to continue indicating that tightening is still a ways off, they have to remove that threshold and say, “hey, we’re not tightening yet”. They have to do this because they aren’t willing to use a NGDP target and they in a position where it’s unclear whether decreasing asset purchases through QE represents monetary tightening or not. They are trying to say, “this is not really tightening”. And maybe it isn’t. It kind of depends on what the market thinks about it, and what the market things the fed will do in the future. So communication is really important.

  39. Gravatar of Major_Freedom Major_Freedom
    20. March 2014 at 12:58


    You really didn’t read or think carefully enough. There is no way you could have come to your assessment rationally within such a short time span. You obviously knee jerked and avoided doing the dirty work.

    Well it can also then be said that Sumner rejects my views because it violates his absolutism. He has not yet wavered from his pragmatism and socialism.

  40. Gravatar of TravisV TravisV
    20. March 2014 at 13:24


    You and I both know you that nothing you cited above was particularly compelling.

    Nowhere would a reader think “Wow, I didn’t realize how clueless Sumner is!”

  41. Gravatar of Major_Freedom Major_Freedom
    20. March 2014 at 15:49


    “You and I both know you that nothing you cited above was particularly compelling.”

    Actually I know it is more than “nothing particularly compelling.” Since your theory is flawed, you are not able to sense just how much of a challenge the above passages are.

    “Nowhere would a reader think “Wow, I didn’t realize how clueless Sumner is!””

    It takes a lot more than the time and effort you have put in Travis. I wouldn’t be surprised if 99.999% of the population come to the same conclusion as you if they put in the same effort.

    I don’t expect you understand it all so fast. More importantly, I don’t expect you to be able to do so without a philosophical overhaul, which for someone with your convictions (used to be mine) could very well take years.

  42. Gravatar of ssumner ssumner
    21. March 2014 at 04:52

    Willy, It’s getting increasing hard to take you seriously. So the T-bill yield didn’t predict the ffr when the ff market didn’t exist? And your point is that it can’t do so today? The weather bureau didn’t predict weather when the weather bureau didn’t exist. Does that mean it can’t predict weather today? I mean seriously, what is your point?

    Travis, Where does it say they believe M-policy is zero sum?

  43. Gravatar of TravisV TravisV
    21. March 2014 at 05:15

    Prof. Sumner,

    The market reaction on Wednesday implied that monetary policy is not positive sum.

    In response to the new Fed news, bank stocks increased across the board while the rest of the market fell.

    “Banks and life insurers welcome hawkish Fed lean”


  44. Gravatar of ssumner ssumner
    21. March 2014 at 15:19

    Travis, OK, I see your point. Bad monetary policy is negative sum. I agree.

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