The quasi-monetarists are winning . . .

Check out this interview with Chicago Fed president Charles Evans(sent to me by JimP):

Where is the common ground on the committee right now?

Evans:The statement is fairly clear on that. We see the economy is recovering. We see inflationary pressures lower and we see the unemployment rate high and it is going to be slower to come down. With the funds rate already at zero, there is a pretty valid question as to how accommodative is monetary policy. Some people would point to the size of our balance sheet and say there is an enormous amount of accommodation. Just look at the amount of excess reserves in the system. Milton Friedman looked at the U.S. economy in the 1930s and he saw low interest rates as inadequate accommodation, that there should have been more money creation at that time to support the economy. That wasn’t based upon the narrowest measure of money, like the monetary base or our balance sheet. It was based on broader measures like M1 and M2 and how weak those measures were. I’ve come to the conclusion that conditions continue to be restrictive even though we have a lot of so called accommodation in place. An improvement would be a dramatic increase in bank lending. That would be associated with broader monetary aggregate increases. Then we would begin to see more growth and more inflationary pressures and then that would be a time to be responding.

It’s so gratifying to read this.  As you may know, a small band of us “quasi-monetarists” have been making some of these points for several years.  Most people unthinkingly assumed Fed policy was ultra-loose in 2008-09, merely because interest rates were low and the base had grown enormously.  We pointed out that the same thing had occurred during the early 1930s, and Friedman and Schwartz showed that policy was actually tight in the only sense that really matters—relative to what was needed for on-target inflation and/or NGDP.

Now we have a top Fed official saying things are actually “restrictive,” and using some of the same examples from the 1930s that we often cite.  In my view quasi-monetarism is the best way to diagnose the stance on monetary policy, as we understand that low interest rates often merely reflect a weak economy and severe disinflation.

I suppose I should try to define ‘quasi-monetarism.’

1.  Like the monetarists, we tend to analyze AD shocks through the perspective of shifts in the supply and demand for money, rather than the components of expenditure (C+I+G+NX).  And we view nominal rates as an unreliable indicator of the stance of monetary policy.  We are also skeptical of the view that monetary policy becomes ineffective at near-zero rates.

2.  Unlike monetarists, we don’t tend to assume the demand for money is stable, and are skeptical of money supply targeting rules.

Unfortunately there are almost as many nuances to quasi-monetarism as there are quasi-monetarists. I’ll list a few names in the blogging community, with apologies to those who don’t wanted to be included, and those I leave out accidentally.  I think of monetary bloggers like Nick Rowe, David Beckworth, Bill Woolsey, Josh Hendrickson, myself, and I’m sure there are others.  Some of my frequent commenters have their own blogs, but if I try to list everyone the omissions will just become more noticeable.  If you have a blog and consider yourself quasi-monetarist leave your name in the comment section and I’ll add it here:

Update:  Marcus Nunes, (who has a Portuguese language blog.)  Also commenter “123” who has a blog entitled “TheMoneyDemand”.

I think in the long run quasi-monetarism will merge with monetarism, and become one big school of thought with different perspectives.  If Steven Williamson hadn’t already taken “new monetarism” that might be the right term.  But his perspective and methods are quite different.

HT:  Liberal Roman



41 Responses to “The quasi-monetarists are winning . . .”

  1. Gravatar of JimP JimP
    5. October 2010 at 17:20


    Now – Mr. Fed – LETS GO.

    and don’t forget please – its communication thats the key. Expectations about the future path of monetary policy determine present monetary policy. And expectations = communication plus a touch of muscle.

  2. Gravatar of JimP JimP
    5. October 2010 at 17:21

    Scott wins. Where would we have been without him?

  3. Gravatar of JimP JimP
    5. October 2010 at 17:26

    I was just noticing that various articles call this central bank action “propping up” the world economy – with this hint of derision.

    But thats false. The world economy would do just fine (or a least a lot better than it is) if the central banks would just take their fingers away from around our throats.

  4. Gravatar of ssumner ssumner
    5. October 2010 at 17:58

    JimP, Yes, the central banks are “propping up the economy” in the same way a prize fighter props his opponent against the ropes, so he can pummel him further.

  5. Gravatar of Lee Kelly Lee Kelly
    5. October 2010 at 18:01


    If you’re right, then “monetarist” could be short for “monetary equilibrium theorist”, right? It’s all about the supply and demand for money. Everything interesting about Keynesian econoics (as it pertains to monetary policy) can be expressed and understood far better in terms of MET.

  6. Gravatar of JimP JimP
    5. October 2010 at 18:19


    Yes – that is how the deflationists think – I agree. Prop up the economy to pound it down more (i.e. create more lovely downward wage flexibility).

    As I have said before – I think they want the damage they cause – at least to some degree. It is hard to escape feeling that when one reads Allan Meltzer. He seems to think falling nominal income is a moral virtue – and we need more of it.

  7. Gravatar of StatsGuy StatsGuy
    5. October 2010 at 18:22

    I think you might be manic depressive. In any case, don’t get too happy – I don’t think the views being expressed by the Fed are actually quasi-monetarist in the sense you think. Bernanke has supported, and still indicates support, for short term fiscal action until the crisis is over. I think the Fed/Treasury’s recent shift has been Gagnonite.

    What is Gagnonite?

    Let me lift a quote from Joe Gagnon off of DeLong’s blog:

    “Away from the zero bound, monetary policy can stick to buying safe short-term assets because money yields zero and all other assets have a positive yield. At the zero bound, as you note, for monetary policy to have any effect it must buy other types of assets that do not have zero yield. But in both regimes the way monetary policy works is by pushing down the rates of return on financial assets. That is quite distinct from fiscal policy which works by increasing demand directly, albeit at the expense of higher rates of return on financial assets. And of course, helicopter drops increase demand directly without increasing rates of return on financial assets.”

    Yes, I’m a Gagnon fan, as I’ve mentioned in the past.

    This is just a brilliant quote – and it nails a lot of the disagreement between you and Krugman. I love the quote, because it iterates (better than I could) the main point I’ve been making for 18 months – if you print money and spend it, _everyone_ agrees you can get inflation.

    After a year of reading you and Krugman, here is what I keep hearing – it has to do with permanence, commitment, and equivalence.

    Sumner: “Create more money – I guarantee you can get inflation.”

    Krugman: “No, because you’re printing short term money.”

    Sumner: “So, print long term money. People have to believe you are permanently increasing the money supply.”

    Krugman: “But that’s the problem, no one does.”

    Sumner: “No one believes them because they don’t really want to print more permanent money. They haven’t really tried.”

    Krugman: “Japan tried.”

    Sumner: “No it didn’t.”

    Krugman: “Yes it did.”

    Sumner: “No it didn’t.”

    DeLong: “Uh, let me interject – when the Fed buys short term assets, it’s just letting people swap short term near-zero-interest debt for currency, which is just zero interest debt. So, not much effect here. All hail mighty Cthulu!!”

    Sumner: “Not if it’s a _permanent_ increase. How many times do I have to repeat that? It’s like I’m throwing bricks at a brick wall.”

    Krugman: “Uh, you don’t get it. I don’t even know why I bother lowering myself (a bonafide Nobel scholar) to this level, but look at Japan. If people don’t believe the monetary authority _really_ wants inflation, then they think that ‘permanent’ money will be taken away when the Fed gets cold feet. The Fed and BoJ have lots of tools for taking money away, no matter what they ‘commit’ to in the previous year. That’s why we need Fiscal policy.”

    Sumner: “All your fiscal policy is doing is encouraging the central bank to tighten monetary policy and raising long term rates on assets (aka depressing asset prices). Remember Ricardian Equivalence?”

    Krugman: “Woodford Woodford Woodford.”

    Sumner: “Yes, we both like Woodford, but his model was built on expectations and was just as much quasi-monetarist as neo-keynesian.”

    Joe Gagnon: “Hey, guys, why don’t we just do helicopter drops? Like BB said he would years ago? Doesn’t that solve the commitment problem _and_ the equivalence problem?”

    Krugman and Sumner: “Who invited you to this argument, anyway?”

  8. Gravatar of JimP JimP
    5. October 2010 at 18:30

    No Joe – because they can tax out helicopter drops. Nothing is actually known to be permanent against determined state authority.

    And besides – neither Krugman nor DeLong ever show up on this blog to say what they actually think – though I will bet no small sum of money that they both read it.

  9. Gravatar of happyjuggler0 happyjuggler0
    5. October 2010 at 18:33

    I wish I could think of a catchy way to say, “NGDP expectations level targeter”.

  10. Gravatar of JimP JimP
    5. October 2010 at 18:38

    We need a sweatshirt slogan. A real simple one.

  11. Gravatar of Bonnie Bonnie
    5. October 2010 at 18:41

    Thanks to JimP and Prof. Sumner for highlighting the explanation from the Chicago Fed pres.
    Prof Sumner may have explained it this way before, but I think found a way to simplify it for general consumption (correct me if I am wrong or have oversimplified):

    It is interest rate targeting (funds rate setting) that becomes ineffective at or near the zero bound, but the Fed does not become ineffective in its ability to adjust monetary policy at or near the zero bound.

    That’s really all laypersons needs to know to start to get a clue that there are plenty of other things the Fed could have done but didn’t, and they were misled when told the Fed becomes impotent once the funds rate is at or near zero as a sort of justification for fiscal stimulus. It is just that the tool it uses most often to adjust policy becomes ineffective (obviously if it can’t be lowered any further it has become ineffective), but the Fed can adapt regardless.

    It’s a sort of the cut-to-the-chase kind of statement I’ve been looking for when trying to talk to people about what has been taking place regarding the Fed’s management of the macro economy. Most of the people I’ve tried to talk to about what’s going on (or not going on) at the Fed have been conditioned to understand monetary policy in terms of the interest rates and the size of the base, nothing more. I kept running into the problem of their eyes glazing over and having them stare past me when trying to explain that monetary policy is actually too tight, and I could never even get as far as the discussion about the “Japan Wing” before losing them completely.

    At any rate, it might seem like it is too late to get the word out with the Fed slated to act at the next meeting of the FOMC, but I don’t necessarily think so. There are political implications to the facts as I understand them and it raises more questions to which I believe many would want to know the answers.

  12. Gravatar of David Pearson David Pearson
    5. October 2010 at 18:50

    Statsguy– brilliant!

  13. Gravatar of Joe Joe
    5. October 2010 at 18:54

    Professor Sumner,

    Have you read Leland Yeager? I’ve just currently gone through a short little 1956 article by him, “A Cash-Balance Interpretation of Depression,”, which summarizes the business cycle as just endless episodes of tight money. Its really good and simple. You might enjoy it.

    He’s actually writing exactly what you say. I think he’s your intellectual godfather.

    His definition of recession is great, “Since the prices of many goods and services are notoriously “sticky,” the value of money does not adjust readily enough to keep the amounts of money supplied and demanded always equal as schedules shift. The value of money is often “wrong.” Depression is such a disequilibrium: given the existing levels of prices, wages, and interest rates, people are on balance more eager to get money by selling goods and labor than to give up money in buying goods and labor.



  14. Gravatar of marcus nunes marcus nunes
    5. October 2010 at 19:00

    Include me in the QM “school of thought”.
    Events today vindicate the QM perspective and you should rightly feel elated. In 2001 I published a book (a collection of pieces written between 1994 and 2000) that tracked the last half of the Great Moderation which only came to be so called by Bernanke in the early noughties. Taylor called it the “Long Boom” in 1998. In 1995 I “identified” the steep reduction in volatilities and (to my satisfaction)ascribed it to much better MP under Greenspan´s tenure and was pretty frustrated when the first articles came out in 1999-2001 that put much of it down to (dumb) luck! Even Mankiw went down the “lucky path” with his 2001 paper for the NBER discussing MP in the 1990´s (Mussa had been responsible for that subject in the NBER issue that covered the 1980s). But the very worst was Stiglitz´s 2003 “The Roaring 1990s”. For him the “most prosperous decade ” (his words) “layed down the seeds of destruction, was the result of lucky mistakes, a buuble inflating Fed, criminal deregulation, creative accounting and a host of other sins”.
    In the end I now know that Greenspan was “lucky” because, in his own words at the end of chapter 20 from his memoirs (Age of Uncertainty – a misnomer to boot) he says something like: “I wish I could acknowledge responsability for things turning out well. But I must confess that the only thing I dis was “go with the flow””!!!
    I wish BB had also “gone with the flow”. But “intelectuals” cannot accept something so trivial.

  15. Gravatar of happyjuggler0 happyjuggler0
    5. October 2010 at 19:02


    I’d say it is more of a case that interest rate targeting is bad framing. The Fed, or any other central bank, works by injecting new money into the economy. At “normal” interest rate times, this works out to lower interest rates (all else equal) with more injections, and higher interest rates with less injections or more withdrawals of money.

    The fact that they express this injection (or withdrawal) as interest rate policy is deeply regrettable, and leads to no end of confusion during periods of very high inflation and very low inflation (or deflation).

    It is not low interest rates that is the cause, it is that low interest rates are the effect, during “normal” times anyway, of “easy money”. This does not mean that low nominal interst rates are easy money, nor that high nominal interest rates are tight money, as any examination of deflations and hyperinflations (or very high inflations anyway) should make quite clear.

  16. Gravatar of marcus nunes marcus nunes
    5. October 2010 at 19:08

    Kudos to Statsguy and Bonnie for great “summaries” and to joe for the Yeager link.
    A pity we cannot all get together after all thse months and break out the Champaign.

  17. Gravatar of JimP JimP
    5. October 2010 at 19:16


    I think Stats is right. Its a bit early for the champaign. The deflationists are still real powerful.

    Still – its better than having to listen to Charles Plosser promise to raise rates just as soon as possible. A lot lot better.

  18. Gravatar of JimP JimP
    5. October 2010 at 19:17

    Maybe just one glass of champaign – that would be fine.

    And then one more too.

  19. Gravatar of happyjuggler0 happyjuggler0
    5. October 2010 at 19:22

    Champagne, not champaign. I hate being that pedantic, but it hurts my eyes. Sorry.

  20. Gravatar of JimP JimP
    5. October 2010 at 19:25

  21. Gravatar of marcus nunes marcus nunes
    5. October 2010 at 19:32

    Take every little reason to party!
    You code name says it all. En français, bien sure, “champagne”!

  22. Gravatar of Bonnie Bonnie
    5. October 2010 at 19:32


    Thanks for clearing that up. Is there a better way to simplify it for laypersons when explaining that the Fed is not impotent at the zero bound without being inaccurate? I am self-educated on marcoeconomics after spening most of my career in micro and so I generally understand the concepts presented here, but find it very difficult to explain it for mass consumption and overcome the general interest rate confusion at the same time. If I can’t get people to catch on in the first few sentances, it seems they’re lost to me forever.

  23. Gravatar of happyjuggler0 happyjuggler0
    5. October 2010 at 19:34

    I’m not sure that I want to drink part of Champaign Illinois. No offense to anyone who lives there, I wouldn’t be surprised to learn that your water was just fine.

  24. Gravatar of JimP JimP
    5. October 2010 at 19:36

    Its the beer thats fine – and the corn.

  25. Gravatar of TravisA TravisA
    5. October 2010 at 19:52

    StatsGuy, fun summary. But I think it’s misguided in several ways. Specifically, it treats Scott and Krugman as equals when Scott has been far, far superior to Krugman.

    1) Krugman has said many, many times in his blog that monetary policy is ineffective at the zero bound. He has said a few times that monetary policy is still effective. The overall impression for his readers is that fiscal policy was the only way to save us. Now that fiscal policy is out the window, he has slowly increased the frequency of his comments about the need for more monetary policy, while still saying that monetary policy is ineffective at the zero bound. It just depends on the day of the week for Krugman.

    2) Japan has raised rates in their supposed ‘liquidity trap’ when inflation perked its head up.

    Scott has been on the right side of both of these issues. There is no need for a fake balance here.

  26. Gravatar of TravisA TravisA
    5. October 2010 at 20:00


    Also, I really think that Krugman, DeLong, etc radically, radically over estimate the difficulty of creating inflationary expectations. All you need is for BB to give a single milquetoast speech about inflationary expectations being too low and the stock market bottoms and then rallies 9% in a month. If Krugman et al were right, the market shouldn’t have believed BB or any of the other Fed people who have hinted at an easing. After all, people are going to think that the Fed is going to take away the punch bowl of inflation, right?

    As Krugman says, who are you going to believe: someone who has cost you money or someone who has made you money? Krugman has cost you money, StatsGuy.

  27. Gravatar of happyjuggler0 happyjuggler0
    5. October 2010 at 20:03


    I am probably not the person to ask for simple explanations.

    However, I would say that when the lower bound has been reached, the problem is MV has fallen dramatically because V has fallen while M hasn’t risen to compensate. MV is de facto tight money.

    While we are at it, if MV=x, and V is divided by 2, and M is multiplied by 2, then x doesn’t change.

    Assume a team of strong-backed men are pushing a trolley up a hill at a steady pace, and that team of men go by the catchy moniker of MV, composed of guys who call themselves V and guys that call themselves M.

    Assume also that there are a bunch of “M guys” who are on the sidewalk just watching, and not pushing the trolley up the hill.

    Now imagine that a bunch of V’s see a mouse, and get scared, and run to the sidewalk away from the mouse. What happens to the trolley? It starts a destructive slide down the hill is what happens.

    However, what happens if at that same instant a munch of M’s on the sidewalk heroically jump in and start pushing the trolley just when the V’s move to the sidewalk, and that the new M’s equally compensate for the lost V’s? What happens to the trolley then?

    Well, if you are a gold bug, or a CNBC talking head, or half of the decision makers at the Fed, or the BOJ, or someone who assumed V is a constant to be ignored and eventually forgotten (if ever learned at all), then you might bizarrely assume that the trolley will shoot dangerously ahead at warp speed and wreak all kinds of havoc as a result of those new M’s who jumped in.

    Alternatively, you might assume for some reason that when the V’s leave and the M’s arrive, that the new M’s would be ineffective at taking the place of the V’s, and some people will think it is nuts to think that the trolley will move forward and will liken it to pushing it on a string, so to speak, as if the trolley cares what combination of MV pushes it uphill and somehow the trolley will refuse to move forward if new M scabs arrive to replace departing V’s.

    Those new M’s only jumped in just when those chicken V’s jumped to the side. If and when the V’s jump back in again and start pushing again like the usually do, then it is time for those “new M’s” to move back to the sidewalk. If they do indeed move back to the sidewalk, then there is no “sudden trolley acceleration syndrome”, and all is well.

    However, not everyone understands this unfortunately.

  28. Gravatar of happyjuggler0 happyjuggler0
    5. October 2010 at 20:20

    I would also add, or correct, that regarding “pushing on a string”, that the issue isn’t the trolley not believing that it would still be pushed, but those talking about pushing on a string are complaining that adding new M’s won’t take the fear out of the V’s. Well no duh. The V’s won’t return until they are sure the mouse is far and gone, and there is nothing that the M’s can do to change that. So what. As stated in the above analogy, the new M’s aren’t there to persuade the V’s to return, but rather to replace the V’s until they do indeed return.

    Pushing on a string is very much the wrong analogy, and completely misses the point of new M.

  29. Gravatar of Mark A. Sadowski Mark A. Sadowski
    5. October 2010 at 20:28

    Friedman, “The Role of Monetary Policy”:

    “As an empirical matter, lose interest rates are a sign that monetary policy has been tight —in the sense that the quantity has grown slowly; high interest rates are a sign that monetary policy has been easy — in the sense that monetay policy has grown rapidly. The broadest facts of experience have run in precisely the opposite the directions from that which the financial community and academic economists have all generally taken for granted.”

    I am calling myself a Monetarist. The rest of you heathens can call yourself dogshit for all I care.

  30. Gravatar of Jon Jon
    5. October 2010 at 21:05

    As a historian, are you sure about this remark: “2. Unlike monetarists, we don’t tend to assume the demand for money is stable,”

    I recall watching a video of MF on an old PBS program, as I recall he very carefully laid out that although demand for money could change, the demand for money grew in a stable fashion during normal periods. Therefore if you thought you were in a normal time, you should just expand the money supply at a regular rate.

    Sounded like a Locally-Linear approximation to me.

    So what do you mean here? I think it really is the second part. Who cares if whether or not the demand for money is stable. Only your follow up “and are skeptical of money supply targeting rules” matters.

  31. Gravatar of Lorenzo from Oz Lorenzo from Oz
    5. October 2010 at 21:22

    Between Scott on central bankers as boxers and Statsguy’s brilliantly funny summary, this is a thread to treasure 🙂

  32. Gravatar of 123 – TheMoneyDemand Blog 123 - TheMoneyDemand Blog
    6. October 2010 at 04:39

    NGDP path target is the best solution. Count me in.

  33. Gravatar of StatsGuy StatsGuy
    6. October 2010 at 05:16


    “There is no need for a fake balance here.”

    I’ve been infected by the modern media. Can’t help myself.


    “The deflationists are still real powerful.”

    Yes. Right now, we are back to where we were in late 2007, early 2008 – except the fiscal deficit, debt, and employment are worse, Bush is gone and Obama has blown his political capital. The key is this – expectations of dollar depreciation are going to challenge the Fed by ramping commodity prices. They already have. This time, the market may not leverage so aggressively (e.g. oil may not hit 147 quickly), so we may get a smoother ride.

    The question is whether, when the dollar further depreciates and imports/commodities start kicking up inflation, the Fed will suddenly wet its pants like they did in July/August 08 and move back to tight money. If you look at the inflation components, there are signs of input inflation – just not end price inflation, which suggests margin compression. At a certain point, however, input prices get passed through to end prices.

    I think, however, the bigger change is not that the Fed has switched away from the deflationistas, but that it’s begun to talk about price _level_ targeting, not _rate_ targeting – per Dudley’s speech a few days back. Honestly, we can tolerate the Fed consistently erring on the low side of 2%, so long as they commit to make up lost ground. (And an NGDP target is even better, but let’s be grateful for what we can get.)

    If the Fed (Bernanke) were to give a forceful speech saying that price _level_ targeting was the new standard, that would help solve both short and long term issues. That would be worth popping the champagne.

  34. Gravatar of StatsGuy StatsGuy
    6. October 2010 at 05:24


    “No Joe – because they can tax out helicopter drops. Nothing is actually known to be permanent against determined state authority.”

    Quick note – the monetary and tax authorities are different. Failure of the monetary authority to commit to higher inflation doesn’t imply that the tax authorities (aka, elected officials in Congress) can’t commit to not raising taxes.

  35. Gravatar of W. Peden W. Peden
    6. October 2010 at 06:06

    On nomenclature issues: I think “who is a monetarist?” will always be a tough question, just like “who is Keynesian?” It’s quite hard, for example, to work out a definition of Keynesianism that excludes Milton Friedman but includes J. M. Keynes. There is a book “Monetarism: An Essay In Definition” by Tim Congdon, but it’s from 1978 and is now very out of date.

    I think it’s possible to hold a kind of pessimistic monetarism: monetary aggregates are just as important as Friedman said, but for various reasons (Goodhart’s law, the problem of the effects of changes in the money supply at levels of moderate broad money growth, long and variable lags, the problem of the exchange rate, the imprecision of the relationship between broad money and inflation etc.) targeting monetary aggregates is not the best primary policy tool.

    Such a pessimistic monetarism could, for instance, embrace inflation targeting (or NGDP targeting) as a “fair weather” approach when broad money growth (M4 in the UK) is at a moderate level. However, an additional monitoring of large movements in M4 could be used to anticipate future monetary problems in the future, e.g. the collapse of broad money in mid-2008 should have resulted in urgent monetary stimulus; large increases in broad money should result in higher interest rates etc.

    I think that’s a more realistic and less foolhardy approach that computerisation of central banks with 5% M3 targets.

    At any rate, there are three main camps right now-

    (1) A deflationist camp, which takes its theoretical base from a variety of sources. One distributional relationship that is uniform here is that all of the Austrian economists are firmly in the deflationist camp and are waiting like a suicide cult for hyperinflation. Some, like Ron Paul (not an economist, of course, but steeped in Austrian lore) have been predicting hyperinflation for at least three years now.

    (2) Fiscal stimulus fans, like Krugman and DeLong. Obviously, there’s a near-perfect tendency towards being one or other kind of Keynesian.

    (3) Monetary stimulus fans. While not necessarily monetarists (whatever that may mean) there always seems to be at least some Friedmanite influence here. Anyone who is going to be pro-monetary stimulus, but not pro-fiscal stimulus, is unlikely to be Keynesian. However, as I understand it, New Keynesians might also be able to take this position, though I’m not yet up-to-date with what happened in Keynesianism since the 1980s; the latest explicitly Keynesian book I’ve read was still advocating incomes policies as a means of getting full employment.

  36. Gravatar of JimP JimP
    6. October 2010 at 08:06

    “If the Fed (Bernanke) were to give a forceful speech saying that price _level_ targeting was the new standard, that would help solve both short and long term issues. That would be worth popping the champagne.”

    Yes – if. (Thats a quote, by the way, from the government of Sparta)

  37. Gravatar of JimP JimP
    6. October 2010 at 08:10

    The Spartans were deflationists.

    The Athenians were inflationists.

    The Spartan coins were of iron and weighed 500 pounds. Athens used silver – mixed with hope.

  38. Gravatar of Luis H Arroyo Luis H Arroyo
    6. October 2010 at 10:38

    I´m a “quasi”. I didn´t know. I´ve always considered me a Friedmanite, but I never see V constant or stable. That is the reason of my great surpprise reading the Friedman´s article on the good work of Greenspan compensating the change in V. I think that constant growth of money is irrelevant, only effective if there are no profund shocks.
    So, I am a quasi. That is something, is it not?

  39. Gravatar of scott sumner scott sumner
    7. October 2010 at 05:03

    Lee, Yes ‘monetarist’ would be the right term, but the most famous monetarist is probably Allan Meltzer–and look at the next link by JimP.

    JimP, Yes, that’s discouraging.

    Statsguy, That’s a great post. At the risk of being a humorless pedant, let me point out a couple facts:

    1. I was referring to Evan’s use of a Friedmanesque argument that money was tighter than it looks, and using the Great Depression as an example. That is NOT an argument Krugman would approve of.

    2. My argument with Krugman over Japan isn’t one of those cases where “who’s to say” who is right. Krugman essentially had no argument in his reply to me. Indeed Ryan Avent said his reply actually supported my point.

    JimP, You are right about the helicopter drops. Gagnon doesn’t focus enough on policy expectations.

    happyjuggler0, Something like “stable income growth” but that doesn’t get the level targeting part.

    Thanks Bonnie. Those are very good observations. Your conversations with Fed people sound depressingly plausible. But at least there are quite a few Fed researchers who are generally on our side.

    Joe, Leland Yeager is an excellent example of a “quasi-monetarist.” His version of disequilibrium is slighter closer to Nick Rowe’s “medium of exchange” version than my medium of account approach.

    Marcus, I added you to the post.

    JimP, I always knew the bubbling wine was named after a cow town in Illinois.

    Thanks Travis A.

    Mark, That’s a great quotation. “We are the real monetarists.”

    Jon, You are right–it is the second point about targeting rules that matters.

    Thanks Lorenzo.

    123, Are you saying you want to be added to the quasi-monetarist list? And I forgot your blog name.

    Statsguy, That’s a good point about the dangers of making a July 2008-type mistake again.

    W. Peden, I like that summary of the three camps. It is more accurate than Krugman’s summary.

    JimP, That’s very interesting about the ancient coins. I never knew that history.

    Luis, Glad to have you on board.

  40. Gravatar of 123 123
    8. October 2010 at 05:04

    “Are you saying you want to be added to the quasi-monetarist list?”
    In the TOP 3 list of my favourite economists, Friedman is much higher than Krugman, this might indicate that I am old-monetarist, but when the Fed discontinued M3 data series (and there was no M3 growth rate prediction market), I switched to quasi-monetarist NGDP as the best indicator of monetary policy. Then there is Hayek, but most Austrians ignore his support for NGDP, so I guess I am not Austrian.

    I just wanted to express my strong support for the NGDP level targeting idea. I know you say that NGDP targeting should be implemented by changing the quantity of monetary base, and I think it should be implemented by variable IOR, but I think both of these two options are fully compatible with quasi-monetarism.

    You said:
    “And I forgot your blog name.”
    Here is a hint – my blog does not have the Keynesian name “The demand for savings vehicles to carry purchasing power forward”, and it does not have Minskyite name “The demand for safe assets”.

  41. Gravatar of ssumner ssumner
    9. October 2010 at 05:01

    123, I added your name to the post.

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