On Scott Sumner's Monetary Activism

     This post actually started as a comment in response to Greg. However, after finishing it I realized that it touches on a very important matter as far as Sumner is concerned. Here are my comments in full

     "When I say it's really a political argument that's important because Sumner tries to make it seem like an apolitical technocratic argument."

      "However as we see from the quotes above he favors fiscal austerity. Basically he is a Paul Ryan Republican who positions himself as an apolitical policy wonk."

     "What he is trying to do with monetary policy is what the conservatives used to attack liberals for-judicial activism. What Sumner seeks is "monetary activism."

     "The knock on judicial activism was that liberals would push through new laws in the courts that they couldn't get passed through the legislative process. Of course this has changed now that they control the judiciary they aren't concerned about judicial activism to the contrary this is what they want."

    "Again, Sumner is really a Paul Ryan Republican-he supports deep spending cuts and also major tax cuts for the rich and corporations which he would balance out with new consumption and "value added" taxes."

   "That is maximum tax repressiveness which will somehow "trickle down" to the nonrich by the improved performance of the economy."

   "I agree about the MMT insights about the Treasury in the illusions of "we can't afford it" though I think that as David Corn showed in his recent book Obama did a much better job during that debate than it appeared-he did basically hustle the Right."

     "The fact is that part of why the US economy looks better than Europe is we haven't had austerity."

      "Mevyn King of the Bank of England is widely believed to be doing Sumner's NGDP targeting. Note that this is the country of David Cameron's fiscal austerity."

      "This is no a coincidence, as Sumner constructs his agenda the two go together. Of course the results there are not encouraging, to the contrary they are horrible and the UK may be back in recession now."

     "It works this way. Right now the inflation rate is much higher in Britian-4.8% So if we follow Sumner's proposed 5.5% target this would mean we can only "afford" .07% real gdp growth. So then fiscal policy needs to cut back or certainly can't afford much expansion."

     "Sumner's 5.5% target is relatively generous. Some argue for only a 3.5% or lower. Lars Christensen wants 2%. "

     "So if we had a 2% target in Britian with ssay 4.5% NGDP-that is 4.8% inflation rate minus .3% negative real gdp-Lars could argue that we need some major tighening in Britian on the fiscal side."

   "More belt tighening please."


    http://diaryofarepublicanhater.blogspot.com/2012/04/monetary-vs-fiscal-policy-whats-at.html?showComment=1334593906321#c1617899429937189566

   
     Basically, Sumner is not a stupid man. He's pretty shrewd I'll give him that. He mostly stays away from politics and specific issues being debated in Congress and the public, etc. However as we saw in the above post he did make it clear that he supports fiscal austerity-that's his formula, NGDP targeting for monetary policy and austerity for fiscal policy.

    He's not the enemy of the austerity that many of his readers think he is that is being applied in places like Greece and indeed Britain that has been trying his NGDP targeting. Britain often ends up being the site of the worst monetary experiments as it went 7 years with Friedman's Rule before abandoning the disastrous Monetarist experiment.

    Friedman's ideas were never voted on at the legislative level. In the US the Volcker Fed tried something like his rule mercifully for a much shorter duration than in Britain. Of course in places like Chile Monetarism was forced down the public's throat in notably undemocratic countries-Pinochet's Chile being an ideal place.