Why I’m not discouraged

Commenters often ask me why I’m not discouraged by the fact that no one pays any attention to my advice. The answer is simple; it makes no difference whether anyone pays attention to my advice.  All that matters is whether the ideas I promote are making headway.

Back in 2008 and 2009, I argued for NGDP targeting. I also argued for level targeting.  I also argued for Fed policy being based on market signals, not Phillips Curve models.  I also argued for a “whatever it takes” approach to QE to hit the target.  Last year, I suggested that now is a good time for the Fed to ask Congress for permission to buy a wider range of assets when rates fall to zero, if Treasury bond and MBS purchases are not sufficient to hit their policy targets.  They should be given unlimited ammo.  (It is good time because both the Dems and the GOP are currently doves.)

Now consider the following:

1. In recent years, top Fed officials like Jim Bullard (and others) have expressed interest in NGDP targeting.

2.  In the Fed’s current review of policy options, level targeting ideas have gained increasing traction.

3.  Last year, the Fed followed market signals and ignored Phillips curve models.  As a result they cut rates three times and prevented the recession that would normally have occurred during the trade war (that is, the recession that would have occurred if the Fed were still basing policy on discredited Phillips curve models.)

4.  Now Boston Fed President Rosengren calls for allowing the Fed to buy a wider range of assets.

Eric Rosengren, president of the Federal Reserve Bank in Boston, said on Friday the US central bank should be allowed to buy a broader array of assets to provide stimulus given the sharp and historic decline in Treasury yields.


Many people are too impatient, not understanding that change takes place gradually.  So while it’s true that no one in power reads the rants in my blog posts, the ideas I promote are increasingly accepted at the highest reaches of policymaking.  The zeitgeist is changing.  Indeed it’s changing far more than I expected back in 2008 when I starting crusading for monetary reform.

I have no reason to be discouraged.  All that matters is results.

PS.  Commenter Tjnel left this excellent analogy for monetary policy:

Scott, my go-to explainer for rate hikes/cuts is to ask someone to imagine the plank of a teeter totter sitting completely balanced, and imagine the natural rate of interest as a marble sitting on top of that teeter-totter, directly above the fulcrum. The fed funds rate is the fulcrum and you can shift the fulcrum point from left to right. If the marble (natural rate) gets blown or pushed to the left of the fulcrum it will continue to move that way, which represents a continued fall in the natural rate (and thus falling NGDP), unless the fulcrum is moved to the left in lock-step with the marble. If the fulcrum is shifted with any delay, then it may need to be shifted further to the left than the marble to arrest the marble’s momentum and stabilize the system again. Of course, if the fulcrum is moved left but less so than the marble, then the marble will continue to fall to the left. I guess the ZLB is the edge of the plank!

Of course this is wrong in some ways, but would you critique it so that I can use the most accurate version of this analogy as possible?

I don’t see how it’s wrong.  The smartest commenters are often very modest, and the dumbest . . . well, you’ve all read them.

With that correlation in mind, rereading my recent posts makes me wince.

Off topic, if true this in incredibly good news:

Hubei, the Chinese province at the center of the coronavirus outbreak, reported on Saturday that for two consecutive days, the province had seen no new infections outside its capital, Wuhan. The news confirmed that China’s new cases and deaths are increasingly concentrated in that city, where the virus emerged, while the rest of the province — and the rest of the country — are largely spared.

Hubei reported 74 new infections on Saturday, all in Wuhan. China also recorded 24 cases in people who had arrived from abroad, including 17 in Gansu, a northwest Chinese province. Excluding the infections in Wuhan and among arrivals from abroad, there was only one other new infection in the rest of China.

China also reported 28 deaths among those with the virus, all in Hubei Province. By comparison, there were 49 deaths from the virus in Italy on Friday.

If true, the biggest danger in China (outside Wuhan) is not community transmission of the coronavirus, it’s disease-ridden foreigners from disease-ridden countries bringing their disgusting viruses into ultra-safe China.  A month ago, who would have thunk it? Oh, and I forgot about collapsing buildings collapsing on quarantine patients.  That’s also a danger.

(The data may not be entirely true, but I suspect the trends are strongly in the right direction.)



20 Responses to “Why I’m not discouraged”

  1. Gravatar of sty.silver sty.silver
    7. March 2020 at 11:41

    > So while it’s true that no one in power reads the rants in my blog posts

    Only true until EY finally gets around to taking over the world.

  2. Gravatar of ssumner ssumner
    7. March 2020 at 12:23

    Should I know what EY is?

  3. Gravatar of rayward rayward
    7. March 2020 at 13:12

    It’s true, the interest in NGDP targeting among policy makers is almost entirely due to Sumner. I’ve followed this long enough to see the evolution, from when the idea was ignored (or worse) through the slow but steady progress of acceptance. Give credit where credit is due: to Sumner.

  4. Gravatar of sty.silver sty.silver
    7. March 2020 at 13:36

    Eliezer Yudkowsky. (I was, obviously, joking.)

  5. Gravatar of ssumner ssumner
    7. March 2020 at 14:00

    Sty,silver, Well it’s only obvious once I am informed that you meant Yudkowsky. 🙂

    I wouldn’t want him running the entire world (too much for one person), but I’d like to see him running the global effort to contain coronavirus.

  6. Gravatar of Christian List Christian List
    7. March 2020 at 14:54

    I don’t know, Scott, both of the issues you’re raising look like cherry-picking to me.

    When even Larry Summers makes comments like that, it’s still an endless long way to go.

    And China has success yes, but at the cost of a complete lockdown. Italy is going down a similar road now.

    And countries like the US and Germany just seem to hope that the cup will pass them. Well sorry, hope is not a plan.

    And who uses a seesaw like that? One should probably rather use a scale or a spirit level as an example.

    And a marble on a teeter totter, really? So how big is the marble, and how small is the teeter totter?

  7. Gravatar of ssumner ssumner
    7. March 2020 at 15:12

    Christian, You said:

    “And China has success yes, but at the cost of a complete lockdown.”

    Actually, most Chinese are not in lockdown, but those with the disease certainly are.

    They forced all of their citizens to wear face masks when in public. But then you said that’s useless. 🙂

  8. Gravatar of Benjamin Cole Benjamin Cole
    7. March 2020 at 16:10

    Scholars such as Adair Turner, Stanley Fischer, and David Beckworth suggest that central banks cannot hit NGDPLT unless they have in their toolbox the ability to independently go to money-financed fiscal programs, aka helicopter drops.

    Can we DRAFT Stanley Fischer, the former Vice Chairman of the Federal Reserve Board, and install him in as Chairman of the Federal Reserve Board?

    Start chanting, “Draft Stanley Fischer, draft Stanley Fischer!”

  9. Gravatar of Aleksander Aleksander
    7. March 2020 at 16:24

    “most Chinese are not in lockdown, but those with the disease certainly are.”

    All city-dwellers in Hubei, more than 50 million people, are in “lockdown” (locked inside their city), and have been for over a month. All non-essential companies and institutions in Hubei have been closed for the last four weeks.

    Current death rates in Italy are similar to Chinese death rates (in absolute numbers) a week after the Hubei lockdown, and Italy have only quarantined 50 thousand people so far (they would have to quarantine the entire country to reach Hubei levels).

    “They forced all of their citizens to wear face masks when in public.”

    They also sent police to barricade people inside their own apartments with iron bars. Do you think Italy will do this? They didn’t even get around to closing all their schools until 3 days ago.

  10. Gravatar of yersinia pestis yersinia pestis
    7. March 2020 at 17:39

    all monetary policy is at base fiscal policy as it’s just credit allocation by another name. no central bank support goes directly to all the economic participants equally in time or degree. during the panic of 1873 during the Grant administration, it was the bankers and the businessmen who howled against the inflation bill, which Grant vetoed ultimately, in fear of inflation and its effect on debts that came out of the civil war and the agrarian section suffered for 5 years. same as it ever was today and the common man suffers under the consumer debt overhang. so the central banks will never get the inflation they want unless they abandon the moneyed interests, and instead tinker with asset prices where the other side of the debt slavery of the common man finds its resting place. if we really wanted to change things, the credit allocation would start at the bottom. the cbs mandatorily buys all the debt of the 99% discounted at crisis spread, adjusted as needed for unsecured. the financial sector is demoted to collateral and servicing agents for appropriate fees. its called a jubilee.

  11. Gravatar of Ray Lopez Ray Lopez
    7. March 2020 at 21:53

    Sumner: “my advice” on NGDP LT. Ignores Selgin on this same issue. Ignores, as I first pointed out on this blog when I first posted years ago, that some Depression Era Chicago school obscure professor–Weeks? I’d have to consult my notes–first proposed NGDP LT. Ignores that but for chess master economist Tyler Cowen, nobody would read Sumner. Ignores “no man is an island”. Ignores mechanics like ‘what if the Fed runs out of ammunition since no govt bonds or AAA rated paper to buy? Doesn’t that mean the Fed has to move further down the scale and eventually buy CCC/DDD rated paper?” (yes it does). Ignores animal spirits. And best (worst) of all, ignores history has shown money is largely short term neutral (but not long term, yes, not a typo). Except for that, ‘great post’.

  12. Gravatar of Geoffrey Orwell Geoffrey Orwell
    8. March 2020 at 03:06

    The propaganda machine has done an excellent job of spinning blatant responsibility (lying and covering up for the first month, at least) into: we’ve done a great job and lets be now be afraid of dirty foreigners; wow. If a second wave does hit and people realize the CCP were lying (again) about the true state of the virus, it will be interesting to see whether people swallow the inevitable “blame Italy/Korea/Japan/USA” line that you are already running. Meanwhile the West (America First guys will be the biggest proponents) are going to use their own propaganda channels to hammer China, and recent history suggests it will stick: https://www.pewresearch.org/global/2019/08/13/u-s-views-of-china-turn-sharply-negative-amid-trade-tensions/

    If the economy isn’t working, I’m pretty sure I know where Trump will turn his focus for the 2020 campaign. Buckle up.

  13. Gravatar of Geoffrey Orwell Geoffrey Orwell
    8. March 2020 at 03:17

    Also, on the Fed, given they OVER DELIVERED relative to market pricing Tuesday, and risk assets still sold off in the aftermath, I’d be interested to hear your take on that.

    I guess you could argue the expected shock just outpaced the Feds response, but as someone who works in rates and credit markets, this feels different to everything we’ve seen post 2008. The Fed feels impotent: they are already offered as much liquidity as the market could handle via repos, they’ve cut rates MORE than the mkt expected, and yet BEIs, funding and risk markets are all still tanking.

    Matt King @ Citi: “The trouble for the central banks is that once you set yourself a target of prolonging the cycle no-matter-what, it is hard to admit your limitations. Inevitably you keep on hammering – even when confronted with a screw.”

  14. Gravatar of Christian List Christian List
    8. March 2020 at 06:42


    I think we have discussed the mask topic in detail.

    I read that about 80 million Chinese migrant workers were not allowed to travel back to their work places after the Chinese New Year festivities ended, just to give one example.

    For the German companies in China this was pretty much a lockdown. Over 60% of their employees are migrant workers, production came to a partial standstill, now they are slowly recovering. But the containers need 40-50 days until they arrive in Germany by ship. So there will be relevant gaps in the supply chain.

    Travel restrictions and the cancellation of events seem to be most effective. These are also measures that can be implemented in Western countries. Italy and Switzerland are leading the way.

    The US and Germany seem to lag behind, which I don’t really understand. Our time advantage over Italy is small and the measures would be most effective if undertaken right now.

    Instead, they seem to wait for outbreaks like in Italy, but then even more extreme measures are needed.

    A major outbreak in Germany is in North Rhine-Westphalia, yet this weekend football matches were played in front of 60,000 spectators almost directly in the risk area. This makes no sense at all.

    Italy is currently planning to suspend its entire football championship indefinitely. Switzerland has already ordered a soccer break of at least four weeks. In addition, all events with more than 1000 people are prohibited until at least March 15.

  15. Gravatar of Todd Ramsey Todd Ramsey
    8. March 2020 at 06:59

    Prof Sumner-

    I am absolutely thrilled to see you acknowledge your successes!

    Keep up the great work, you are changing the world for the better!

  16. Gravatar of ssumner ssumner
    8. March 2020 at 09:01

    Aleksander, 4% of Chinese? Thanks for confirming that what I said is true.

    Yersinia, You said:

    “all monetary policy is at base fiscal policy as it’s just credit allocation by another name.”

    The sort of meaningless claim that isn’t even worth responding to.

    Geoffrey, You said:

    “whether people swallow the inevitable “blame Italy/Korea/Japan/USA” line that you are already running.”

    I was being sarcastic. In case you didn’t notice, lots of westerner are blaming disease ridden Chinese people for the problem.

    You said:

    “Also, on the Fed, given they OVER DELIVERED relative to market pricing Tuesday, and risk assets still sold off in the aftermath”

    If that had happened, I would have offered an opinion. But since it did not, I did not.

    Christian, I agree that the US and Europe have been very slow to respond, indeed worse than many East Asian countries.

    Todd, They are not my successes, they are our successes.

  17. Gravatar of yersinia pestis yersinia pestis
    8. March 2020 at 14:08

    you demur. but riddle me this batman: if all monetary policy is not fiscal policy by another name, then why do monetarists such as yourself think there is a role for fiscal policy?

  18. Gravatar of Aleksander Aleksander
    8. March 2020 at 17:58

    “Aleksander, 4% of Chinese? Thanks for confirming that what I said is true.”
    No problem. I thought you implied something disingenuous about Italy’s situation, but I probably misread you.

  19. Gravatar of Geoffrey Orwell Geoffrey Orwell
    8. March 2020 at 18:22

    we were pricing less than 50bps, and then cut 50??? How did they not over deliver?

    stocks are limit down in asia.

    Unless the fed want to start buying billions of $’s of global stocks right now, I’d say the pumping is done.

    Time for the dump.

  20. Gravatar of ssumner ssumner
    9. March 2020 at 08:27

    yersinia, I don’t see a role for fiscal policy.

    Geoffrey, Interest rates are not monetary policy, a point I’ve made a zillion times. We need an expansionary monetary policy.

Leave a Reply