If NGDPT is the panacea Sumner tells us do we have any empirical proof to substantiate his big claims for it at all. Turns out we do. Britmouse quotes Cameron approvingly here:
"Getting our debt under control is necessary for growth. But it’s not sufficient. Our responsible fiscal policy is being matched by active monetary policy. That’s the best way to support demand and help rebalance our economy away from debt-fuelled consumption and towards exports and investment. And the independent Bank of England is able to do more to support the economy if necessary or if inflation falls below their target."
"Fiscal responsibility and monetary activism is the right macroeconomic mix for our over-indebted economy. But the additional ingredient that government will deliver and needs to do even more of is a radical programme of microeconomic reform to make our economy more competitive – including competitive tax rates, planning reform and deregulation."
Now have I not made this point in the past that NGDPT at least as Sumner presents it is simply austerity-"structural reforms"-through the backdoor? Cameron is what Sumner has in mind. Yet what's interesting is that when you listen to him explain it he tends to undersell the fiscal austerity side. What he does do is at times belabor the idea that the "fiscal multiplier is roughly zero."
Listen to Lars Christensen who gives you the Market Monetarist ideology:
"While I am certainly is no Keynesian (I my readers know that very well…) and my gut instincts are (very!) fiscally conservative I have some sympathy with what Hollande is saying. While I strongly believe that Europe needs massive structural reforms to bust productivity growth in the longer run I also believe that the present crisis has very little – if anything – to do with the lack of structural reforms. The crisis in Europe has nothing to do with tax evasion in Greece, rigid Italian and Spanish firing and hiring rules or an overly generous French pension system. These are all massive problems that need to be addressed, but they are not the causes of the crisis. The crisis is primarily a result of the massive drop in nominal GDP, which we have seen in the euro zone since 2008. And that problem can only be solved by the ECB moving towards a much easier monetary policy stance. There is no way around this."
Sumner always says the same thing-that the crisis has very little-if anything-to do with a need for structural reforms though these are necessary. Yet while fiscal asuterity is played down I have always had a the sneaking suspicoun that it's much more important than a comment like Lars makes it seem. Not that saying the fiscal multiplier is zero doesn't necessarily imply austerity. You don't have to take the springboard from there to spending cuts, you could just leave things at the status quo fiscally while doing monetary easing but that's not what they have in mind. So it is that Lars recommends Cameron.
Of course Cameron can singlehandedly unilaterally do this in Britain as the fiscal authorities-Cameron-can directly dictate to the BOE what to do. I do like that feature-there's no Bank of England independence.
But all this begs the question. I'm sorry to have to "go here" but here's the rub: if Britain is doing NGDP does it have much to show for it? I mean the UK is on the verge of a double dip/