So NGDP has another watershed moment. The previous one was last November after the Goldman Sachs paper that advocated it as did all the Keynesians like Krugman, Delong, and Christine Romer. Then it was reported that Bernanke's FOMC debated it though Bernanke decided to stay put with status quo that nobody is too excited about recently.
Now we have a new watershed we have the first Federal Reserve president Charles Evans advocating it. Another feather in the cap of NGDP extraordinaire Scott Sumner. As he says "One down eleven to go."
And I'll celebrate with him today even if it is true that "Scott Sumner is a Paul Ryan "
As I made clear in the post above I do think that Sumner has an agenda with NGDP beyond the explicit case he makes. To be sure all Monetarism does starting with it's modern Father Milton Friedman.
Still I tend to agree with Steve Waldman that NGDP is certainly better than a inflation target. What we have now is a Federal Reserve that no matter how much pain we feel is more worried about its inflation fighting credibility than anything else. Sure, we have a dual mandate and yes Bernanke claims to take it seriously.
But talk is cheap. What the NGDP tarrget does if force the issue. This would mean he as to do more than pat his own back about 2% inflation even with millions of Americans out of work and RGDP way under trend.
"Sounds wonky? It is. But here's why Evans' suggestion is also extremely bold. The Fed famously has a dual mandate: It's supposed to promote the maximum level of employment consistent with its two-percent inflation target. In reality, this dual mandate often looks more like a single inflation mandate. NGDP level targeting would do away with this problem by rolling the mandates together. And right now, that would mean a much more aggressive Federal Reserve."
Marcus Nunes is ebullient:
"Late last night I wished “new voices” would come out of the woodwork. Rare for a wish to be so promptly granted!"
Again, despite what reservations anyone might make-we don't know how well it will work, there is also the fact that Sumner thinks it will actually serve to impose fiscal austerity-I am with Waldman. It would seem that it has to be better than the current inflation targeting regime.
Because as the Atlantic puts it:
"In the end, this is really a clash over inflation. After all, we're talking about central bankers here. The first group is worried that by effectively printing more money to goose the economy (better known to in policy circles as "quantitative easing"), the Fed has already created future inflation. The second group isn't worried about the money that's already been printed, but believes that running the presses any further will create future inflation. Finally, a third group is worried that if the Fed doesn't print more money, there won't be enough inflation to keep the economy healthy. Evans belongs to the last camp."
Ron Paul is an example of why it's so difficult politically to make the point that some inflation right now could help-in that rather sad debate with Krugman the other day he declared that inflation is up 98% since the Federal Reserve Act. It seems that nobody ever gets that this is the price of civilization-I heard that phrase from the reader Greg the other day in fairness of attribution.
So NGDP would enable us better to make up for the output gap in times like this. Again, I've heard criticism of NGDP but nobody has explained to me how it wouldn't be better than the current regime-other than inflation phobes and austerity enthusiasts. I haven't heard a good Keynesian argument why we're better off with the status quo. So I think it's fair to call this a good thing.