According to him in September 2008 the Fed suddenly went way off course.
"For some reason the policy was abandoned in late 2008. The Fed began forecasting a path for aggregate demand that was clearly below their implicit policy goals. They weren’t just ignoring market forecasts; they were ignoring their own forecasts. And they did so even before rates had hit zero. Why?
"As of September 2008 I’d been basically fine with Fed policy for 25 years. I generally had a “whatever” attitude. Suddenly policy seemed obviously, shockingly, far off course. And no one has been able to explain to me why I was wrong. I’m still waiting for a good explanation for the Fed’s decisions—these transcripts certainly don’t provide one."
http://www.themoneyillusion.com/
I just have a hard time believing that the Fed overnight went from doing an essentially flawless job-according to Sumner it was doing nothing worth criticiizng-to doing a terrible job and forgetting that it believed in something very similar to NGDPLT-Sumner has often culled quotes of Bernanke in the past which he says demonstrates that the Fed was basically Market Monetarist-prior to September 2008. It just sounds a little too convenient for Market Monetarists where everything allegedly confrims that they're right, that Sumner got everything right.
However, what I really have a problem with is this implication that the Fed was doing a great job before September 2008. The Great Moderation is an era that I'm quite ambivalent about. I think the economy had perfmed much better in the so-called hydraulic era so I don't see that the GM is much to brag about. No doubt, the argument would be that hydraulic Keynesianism was discredited because of the 70s inflation. Yet there are some questions begged by this claim.
1. For one thing, it ignores that we had stable inflation for most of the HK era-until the 70s.
2. If HK is discredited by the 70s why isn''t the GM era discredited by what''s happened since 2008?
3. In fact, the 70s were a much better time for most Americans than the era starting in 2008.
"For some reason the policy was abandoned in late 2008. The Fed began forecasting a path for aggregate demand that was clearly below their implicit policy goals. They weren’t just ignoring market forecasts; they were ignoring their own forecasts. And they did so even before rates had hit zero. Why?
When I talk to elite economists they tell me that reducing rates to zero a bit earlier would not have helped much. OK, but even so why not do it? And why not also do QE and forward guidance? And why pay interest on reserves? (The rate was significantly higher than 1/4% during November 2008.)"
"As of September 2008 I’d been basically fine with Fed policy for 25 years. I generally had a “whatever” attitude. Suddenly policy seemed obviously, shockingly, far off course. And no one has been able to explain to me why I was wrong. I’m still waiting for a good explanation for the Fed’s decisions—these transcripts certainly don’t provide one."
http://www.themoneyillusion.com/
I just have a hard time believing that the Fed overnight went from doing an essentially flawless job-according to Sumner it was doing nothing worth criticiizng-to doing a terrible job and forgetting that it believed in something very similar to NGDPLT-Sumner has often culled quotes of Bernanke in the past which he says demonstrates that the Fed was basically Market Monetarist-prior to September 2008. It just sounds a little too convenient for Market Monetarists where everything allegedly confrims that they're right, that Sumner got everything right.
However, what I really have a problem with is this implication that the Fed was doing a great job before September 2008. The Great Moderation is an era that I'm quite ambivalent about. I think the economy had perfmed much better in the so-called hydraulic era so I don't see that the GM is much to brag about. No doubt, the argument would be that hydraulic Keynesianism was discredited because of the 70s inflation. Yet there are some questions begged by this claim.
1. For one thing, it ignores that we had stable inflation for most of the HK era-until the 70s.
2. If HK is discredited by the 70s why isn''t the GM era discredited by what''s happened since 2008?
3. In fact, the 70s were a much better time for most Americans than the era starting in 2008.
No comments:
Post a Comment