"Suppose a big investment bank went into 2013 as a Keynesian institution, believing that “fiscal headwinds” would lead to a growth slowdown, and then was mugged by reality. What would it sound like if they came to the conclusion that monetary policy would offset fiscal austerity, indeed more than offset fiscal austerity."
"They’ve just raised their Q1 growth forecast from 1.5% to 3.0%, and full year growth forecast to 3.5%."
"Market monetarists: Keynesians and Austrians who have been mugged by reality."
"PS. I do not think growth will be as strong as they do, but I do think the recent fiscal austerity will have almost no impact on growth, as it will be offset by monetary stimulus."
http://www.themoneyillusion.com/?p=20170
In a way this sequester puts you in a strange position. I believe that the sequester will harm the economy. However, I don't want it to. I don't want there to be too much pain. However, the more pain the quicker the GOP is forced back to the negotiating table.
I don't particularly want to give Sumner an excuse to be triumphalist. However, it would be a small cost for seeing the recovery remain sustained. So let's hope it is. The worry over who gets or doesn't get credit for it is another question. I for one haven't been very bearish recently-and I'm a Keynesian.
So is QE3 taking away all the pain in the sequester? Still we don't know what the impact of it is yet. We know that it's already making itself felt in certain GOP states which is bringing Republicans to: demand their cake and eat it it to. They both say the President has been crying wolf and that cuts have been made in things like the White House tour for political reasons-ignoring that a sequester is done indiscriminately; that is to say, without discretion-while demanding special treatment in their own states. Essentially they're both for the sequester yet against it-NIMBY sequestration.
Sumner continues to use claims on the success of monetarism that have little/no relation to NGDP or employment. First it was the rising stock market, which has continued to rise despite falling NGDP, declining earnings and rising real interest rates...go figure. Now we're looking at estimates of RGDP, which are notoriously over-optimistic. The fact DB has raised its estimates says nothing about whether NGDP will actually be above even 4% this quarter or for 2013.
ReplyDeleteGreat to hear from you again Josh! I had wondered if you had moved-LOL.
DeleteAs great as it is to have your insights, I wish you had minored in Google Adsense-who has recently without warning nor giving any reason closed my account.
I now have no good way of monetizing my site and don't know if I ever will again. Yes, I already wrote a piece about this but I'm venting. LOL.
I will still hopefully keep cranking at the posts as it's not only about the money. Still if man doesn't live by bread alone, he still lives by bread.
Sumner did say he thinks DB is over optimistic. If GDP does rise, it's plausible to believe NGDP will as well unless we have deflation...
Don't get me wrong, I agree with your overall point about Sumner, of course.
Hey man, its all about the expectations!! As long as the VSP expect things to be good..... they WILL be good. We just need to manage their expectations!!
ReplyDeleteWhat a crock of crap. And this guy thinks he's a scientific mind. He takes one (questionably) positive data point, in one very small time frame, and claims a macroeconomic victory. Does he even know what MACRO means??!! Its about "The big picture" Scott.
Sumner is just like the Rovians claiming the permanent republican majority 15+ years ago. How'd that work out.
Unfortunately he's going to turn out to be like the DB who taunts the opponent in the first quarter after a big hit ....... and then gives up 5 TD passes.
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