Sumner, Morgan Warstler and Patrick Sullivan on the Benefits of Market Monetarism

     I see that Sumner has finally embraced Morgan and I say it's about time. I've always said that there is no daylight between the two and Sumner now confirms it-as opposed to dippy liberals and centrists who insisted as seeing Morgan as wild eyed and and extremist with Sumner as moderate and reasonable.

    "The title of this post was left in a recent comment by Morgan Warstler.  What he means is that NGDPLT takes nominal spending off the table, all that’s left is for the government to try to influence the split between P and Y.  And that means demand policies don’t work, all fiscal policy must be supply-side, aimed at more growth and hence less inflation."

    "If conservatives understood this then market monetarism would go from being a fringe movement eyed suspiciously by those on the right, to a position where we’d be headline speakers at CPAC. While we’re at it, Morgan’s wage subsidy scheme makes the minimum wage and welfare obsolete."

     http://www.themoneyillusion.com/?p=26442

     This exactly what I've always said-NGDPLT is for Republicans to get the kind of cuts to government they can't get through the front door. Then Patrick Sullivan really underscores the point even more-turns out a government that controlled inflation with fiscal policy has existed before-guess which country did it?

     "Something like the fiscal side controlling inflation happened in Chile after the 1973 coup. As Pinochet privatized hundreds of businesses that Allende had nationalized (and others that had been informally seized by las turbas) the increase in productivity increased the supply side and moderated the 1,000% inflation rate the junta inherited."

     "Of course, it took Chicago Boys to really bring inflation down to reasonable levels over many years."

    Yes, we need a dictator to achieve this utopia as Benjamin Cole understands:

     "Kudos to Morgan. ..but someday look at federal agency spending (that is, not spending financed by FICA). Once you take DoD, VA, DHS, Intelligence and rural subsidies…hardly much else left.

And I would shoot for 5 percent NGDP growth…jn a democratic nation, structural reforms are impossible…think ethanol and zinc pennies…"

     This is a big part of why Sumner prefers monetary to fiscal policy here-it's not by directly elected officials but by a Fed with 'independence.' 

     Morgan insists there is something for the Dems in all this-which I have a hard time buying. His argument is that we have hit a kind of Great Stagnation-a la Tyler Cowen-and the only hope is lots of austerity. 

     "There’s no reason government can’t deliver 3-4% productivity gains YOY for a solid 10-20 years.

Eventually, this is the Dem’s best play."

      It's the best play for the Dems to become Republicans this is what conservatives always want us to believe. In any case, Sumner now admits to having the agenda I've always said he has-while others are incredulous at the thought. We'll see how they misconstrue him next. 

       I get Morgan's theory as I wrote about-that the Internet revolution means we have to cut government-so it was supportable before to have minimum wage. However, Greg offered a good counterexample-Australia has a very high MW as is doing pretty well.