Jackson Hole: Speech, Speech . . .

Nearly 2 years ago (in October 2008) I started running around like a chicken with its head cut off.  I talked to distinguished professors, wrote op eds, submitted papers to journals.  I haven’t stopped.  But the most common reaction at the time was:

1.  It’s not a monetary problem it’s a banking problem. 

2.  You can’t push on a string.

3.  Rates are already near zero.

4.  We need fiscal stimulus.

When NGDP is falling fast it is ALWAYS a monetary problem.  Two years later this awareness has seeped all the way down to the Drudge report.  Here are the top three headlines today:

Bernanke Under Pressure to Prop it Up!

Jackson Hole:  Speech, Speech . . .

Weak GDP Raises Stakes for Obama . . .

Now it’s not just one monetary crank, the whole world is looking to Bernanke to save us.  Can he fight off the arch-villain Fed hawks?  Stay tuned . . .

PS.  Yes, I over-dramatized a bit to make myself look good.  There were a few others like David Beckworth, Earl Thompson and Robert Hetzel.  And Jim Hamilton occasionally had some good things to say.  But in retrospect it is absolutely stunning how silent the profession as a whole was, at least on the need for monetary stimulus.  Better late than never.



7 Responses to “Jackson Hole: Speech, Speech . . .”

  1. Gravatar of marcus nunes marcus nunes
    27. August 2010 at 06:39

    Still in denial: (optimistically, maybe a little less so)
    “Should further action prove necessary, policy options are available to provide additional stimulus. Any deployment of these options requires a careful comparison of benefit and cost. However, the Committee will certainly use its tools as needed to maintain price stability–avoiding excessive inflation or further disinflation–and to promote the continuation of the economic recovery”.

  2. Gravatar of Benjamin Cole Benjamin Cole
    27. August 2010 at 07:30

    Congratulations Scott Sumner. Not for being right–but for trying to be a good citizen, and put forth your views.
    You could have stayed in the Ivory Tower and fumed or gloated. Instead, you got out on the playing field, maybe got knocked down into the dirt a few times, been ridiculed–but it looks like you did your part to push the ball downfield (well, football season is upon us).
    There will always be those who stand on the sidelines and snigger. You were not one of those.
    Let us hope Fed actions deflect a recession-deflation. I know guys out of work. I am in my mid-50s, and I see many, many people who I wonder will ever get a job again. This is important stuff.

  3. Gravatar of Philo Philo
    27. August 2010 at 08:07

    @ Benjamin Cole:
    “There will always be those who stand on the sidelines and snigger. You were not one of those.” Well, it’s your analogy, but I would say Scott *is* on the sidelines. It’s really too bad he’s not quarterbacking!

  4. Gravatar of Howard Howard
    27. August 2010 at 08:28


    Speaking of Earl Thompson, it is easy to see similarities between nominal wage level targeting and NGDP level targeting but can you think of circumstances where they would be very different?

    Also, it would be nice if Bernanke realized that by operating with NGDP level targeting he could get the market participants to do much of his work for him. This would allow him to operate with a light touch, a kind of monetary jujitsu if you will. Most people would see this as a good thing, unless they prefer car and plane rides with lots of extraneous motion.

  5. Gravatar of scott sumner scott sumner
    27. August 2010 at 11:26

    Marcus, Yes, I have a new post–and noticed that quote as well.

    Thanks Benjamin and Philo.

    Howard, I guess the difference occurs when the share of income going to labor changes, or when hours worked per capita changes.

    To be honest, the wage target is probably better on theoretical grounds, but is hard to implement for all sorts of reasons.

    Your second paragraph is exactly right–I wish more people could see that point.

  6. Gravatar of Benjamin Cole Benjamin Cole
    27. August 2010 at 13:46


    Yes, but Sumner could have written another academic paper long after the fact–instead he is, with the tools available, wading in.

    Yes, I wish he sat on the Fed board……………

  7. Gravatar of scott sumner scott sumner
    28. August 2010 at 15:20

    Benjamin, Thanks, but it won’t happen.

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