I've recently said that regarding Sumner's Market Monetarism, it seems to me it's comprised of 2 chief parts:
1. Moving from the Taylor Rule of targeting inflation to targeting NGDP
2. Monetary offset
I like to say that the carrot for liberals is 1 but the carrot for conservatives is 2. Before 2 really sunk in, conservatives were rather skeptical of MM and liberals were kind of intrigued. Now that 2 has set in, conservatives get it: Sumner is their Great White Hope as it were. He's sort of their last line of defense-as Monetarism always has been.
However, while I'm generally skeptical of Sumner, it seems to me that arguably, 1-without 2-might at least be considerable progress over Taylor's Rule-right now he and the GOP are desperate to defend it.
http://diaryofarepublicanhater.blogspot.com/2015/02/its-all-about-taylor-rule-and-zlb.html
http://diaryofarepublicanhater.blogspot.com/2015/02/in-attacking-janet-yellen-gop-shows.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29
Parenthetically, Greg does have some objections to using NGDP but I always forget the exact details. Part of it comes down to his claim that NGDP is really nothing new-in tracking it you're still tracking inflation. It's true that in the chicken-egg sense, NGDP comes first and came first historically, as only after they started calculating it did they start subtracting inflation from it.
Nevertheless, it still seems to me that this would be an improvement as you can at least separate 'good inflation and bad inflation' by considering growth as well as inflation. I do have to grant Sumner's point on one thing: right now if you still as Laurence Mishin does want looser money for longer-he calls for ZIRP at least until 2016
http://diaryofarepublicanhater.blogspot.com/2015/02/stephen-williamson-vs-laurence-mishkin.html
It's actually looking at inflation that makes the case for you rather than looking at employment which is already lower than anyone would have hoped a few year ago. If you look at GDP or employment you'll get arguments that rates have to go up and money has to tighten.
Overall, I suspect that most liberal-Keynesian types-like myself-have never been a fan of inflation targeting as in principle even it prefers low inflation to high growth or low unemployment. While I've never been a big booster of Audit the Fed I was rather struck by Janet Yellen arguing against it by saying that if we had audited the Fed in 1980 then Volcker may have not gotten to do his disinflation.
http://diaryofarepublicanhater.blogspot.com/2015/02/after-her-dovish-comments-market-loves.html
Talk about a feature not a bug.
Regarding the Great Inflation itself-which is usually credited for our turn towards inflation targeting and the victory of Milton Friedman over James Galbraith, there's still nothing like an old smackdown over what actually happened in the 70s and what did cause the GI?
The mainstream view of Sumner, et. al is that the Fed printed way too much money. Here Warren Mosler uses a counter view often used by Post Keynesian types-it was the spike in oil prices.
You know Mosler-you can't read him without hearing about his own storied history as a market participant. This is more or less symptomatic of the MMT brand it seems to me-and Cullen Roche as well even if he left MMT for MR. Being an MMTer means you want people to know that you came by your knowledge the right way: as a market participant not an academic.
I'm never sure what I make of that: by all means I'm suitably impressed by anyone who's a successful market participant. More power to them and I don't at all begrudge them regaling us with it. I still wonder though if this isn't a case of Lockean empiricism run amok: the idea that to understand the monetary system you had to have actually traded finance and the bond market.
Isn't the reality theory is one thing, practice another? I don't think the two are one in the same. Even in football you see this is true by the fact that most great coaches weren't great players-and today fewer and fewer NFL coaches even played in the NFL.
http://diaryofarepublicanhater.blogspot.com/2015/02/the-nfl-is-game-of-untalented-older-men.html
In that post I could have made my title even stronger by saying that the NFL is not just a game of untalented old men coaching talented young men but often untalented old white men, training talented young black men.
Here is Mosler:
"I entered banking in 1973 with a job collecting delinquent loans at the Savings Bank of Manchester in my home town of Manchester, Connecticut. I was the bank’s portfolio manager by 1975, which led to Wall St. in 1976, where I worked on the trading floor until 1978. Then I was hired by William Blair and Company in Chicago to add fixed income arbitrage to their corporate bond department. It was from there that I started my own fund in 1982. I saw the “great inflation” as cost-push phenomena driven by OPEC’s pricing power. It had every appearance of a cartel setting ever-higher prices which caused the great inflation, and a simple supply response that broke it. As OPEC raised the nominal price of crude oil from $2 per barrel in the early 1970’s to a peak of about $40 per barrel approximately 10 years later, I could see two possible outcomes. The first was for it to somehow be kept to a relative value story, where U.S. inflation remained fairly low and paying more for oil and gasoline simply meant less demand and weaker prices for most everything else, with wages and salaries staying relatively constant. This would have meant a drastic reduction in real terms of trade and standard of living, and an even larger increase in the real terms of trade and standard of living for the oil exporters."
"The second outcome, which is what happened, was for a general inflation to ensue, so while OPEC did get higher prices for its oil, they also had to pay higher prices for what they wanted to buy, leaving real terms of trade not all that different after the price of oil finally settled between $10 and $5 per barrel where it remained for over a decade. And from where I sat, I didn’t see any deflationary consequences from the “tight” monetary policy. Instead, it was the deregulation of natural gas in 1978 that allowed natural gas prices to rise, and therefore, natural gas wells to be uncapped. U.S. electric utility companies then switched fuels from high-priced oil to what was still lower-priced natural gas. OPEC reacted to this supply response by rapidly cutting production in an attempt to keep prices from falling below $30 per oil barrel. Production was cut by over 15 million barrels a day, but it wasn’t enough, and they drowned in the sea of excess world oil production as electric utilities continued to move to other fuels."
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
In the narrative of Sumner and Friends, the supply shock of oil exacerbated the problem but it was primarily demand pull inflation that was the problem. It seems to me that one way to litigate this would be to look at the other costs in the economy-if most of the price increase was concentrated in oil that would seem to validate the cost push explanation but if other prices also spiked that would validate demand pull. Mosler here seems to agree that other prices rose but that this was just the effect of the rise in oil and then natural gas.
If anyone has more light to shed you know where to find me-LOL.
UPDATE: I did read the 'Seven Deadly Innocent Frauds' by Mosler a few years ago, but I've decided to read it again as I definetly know a lot more about economics than I did then. When I say that Mosler and the other MMTers like to boast about their market experience see him here:
"So, how am I uniquely qualified to be promoting these proposals? My confidence comes from 40 years’ experience in the financial and economic realm. I would venture that I’m perhaps the only person who can answer the question: “How are you going to pay for it?” My book takes on this issue and encourages the return of economics study to the operational realities of our monetary system."
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
This is different from how mainstream economists judge whether someone is qualified to discuss such issues-some base it on academic credentials or how many peer review articles have they published or whether or not they agree with the basic Neoclassical nomenclature-Ricardian Equivalence, monetary neutrality, the preference of monetary over fiscal policy, etc.
More than anything, mainstream economists want to establish that the person they're reading is an economist and not all are as narrow as my descriptions above. However, in their mind what matters is not whether you yourself have experience in the market but whether or not you have experience as an economist-Sumner says that to earn the status of being an economist in his yes, you don't necessarily have to be from an academic background. He allows that a layperson could be considered a 'real economist.'
1. Moving from the Taylor Rule of targeting inflation to targeting NGDP
2. Monetary offset
I like to say that the carrot for liberals is 1 but the carrot for conservatives is 2. Before 2 really sunk in, conservatives were rather skeptical of MM and liberals were kind of intrigued. Now that 2 has set in, conservatives get it: Sumner is their Great White Hope as it were. He's sort of their last line of defense-as Monetarism always has been.
However, while I'm generally skeptical of Sumner, it seems to me that arguably, 1-without 2-might at least be considerable progress over Taylor's Rule-right now he and the GOP are desperate to defend it.
http://diaryofarepublicanhater.blogspot.com/2015/02/its-all-about-taylor-rule-and-zlb.html
http://diaryofarepublicanhater.blogspot.com/2015/02/in-attacking-janet-yellen-gop-shows.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29
Parenthetically, Greg does have some objections to using NGDP but I always forget the exact details. Part of it comes down to his claim that NGDP is really nothing new-in tracking it you're still tracking inflation. It's true that in the chicken-egg sense, NGDP comes first and came first historically, as only after they started calculating it did they start subtracting inflation from it.
Nevertheless, it still seems to me that this would be an improvement as you can at least separate 'good inflation and bad inflation' by considering growth as well as inflation. I do have to grant Sumner's point on one thing: right now if you still as Laurence Mishin does want looser money for longer-he calls for ZIRP at least until 2016
http://diaryofarepublicanhater.blogspot.com/2015/02/stephen-williamson-vs-laurence-mishkin.html
It's actually looking at inflation that makes the case for you rather than looking at employment which is already lower than anyone would have hoped a few year ago. If you look at GDP or employment you'll get arguments that rates have to go up and money has to tighten.
Overall, I suspect that most liberal-Keynesian types-like myself-have never been a fan of inflation targeting as in principle even it prefers low inflation to high growth or low unemployment. While I've never been a big booster of Audit the Fed I was rather struck by Janet Yellen arguing against it by saying that if we had audited the Fed in 1980 then Volcker may have not gotten to do his disinflation.
http://diaryofarepublicanhater.blogspot.com/2015/02/after-her-dovish-comments-market-loves.html
Talk about a feature not a bug.
Regarding the Great Inflation itself-which is usually credited for our turn towards inflation targeting and the victory of Milton Friedman over James Galbraith, there's still nothing like an old smackdown over what actually happened in the 70s and what did cause the GI?
The mainstream view of Sumner, et. al is that the Fed printed way too much money. Here Warren Mosler uses a counter view often used by Post Keynesian types-it was the spike in oil prices.
You know Mosler-you can't read him without hearing about his own storied history as a market participant. This is more or less symptomatic of the MMT brand it seems to me-and Cullen Roche as well even if he left MMT for MR. Being an MMTer means you want people to know that you came by your knowledge the right way: as a market participant not an academic.
I'm never sure what I make of that: by all means I'm suitably impressed by anyone who's a successful market participant. More power to them and I don't at all begrudge them regaling us with it. I still wonder though if this isn't a case of Lockean empiricism run amok: the idea that to understand the monetary system you had to have actually traded finance and the bond market.
Isn't the reality theory is one thing, practice another? I don't think the two are one in the same. Even in football you see this is true by the fact that most great coaches weren't great players-and today fewer and fewer NFL coaches even played in the NFL.
http://diaryofarepublicanhater.blogspot.com/2015/02/the-nfl-is-game-of-untalented-older-men.html
In that post I could have made my title even stronger by saying that the NFL is not just a game of untalented old men coaching talented young men but often untalented old white men, training talented young black men.
Here is Mosler:
"I entered banking in 1973 with a job collecting delinquent loans at the Savings Bank of Manchester in my home town of Manchester, Connecticut. I was the bank’s portfolio manager by 1975, which led to Wall St. in 1976, where I worked on the trading floor until 1978. Then I was hired by William Blair and Company in Chicago to add fixed income arbitrage to their corporate bond department. It was from there that I started my own fund in 1982. I saw the “great inflation” as cost-push phenomena driven by OPEC’s pricing power. It had every appearance of a cartel setting ever-higher prices which caused the great inflation, and a simple supply response that broke it. As OPEC raised the nominal price of crude oil from $2 per barrel in the early 1970’s to a peak of about $40 per barrel approximately 10 years later, I could see two possible outcomes. The first was for it to somehow be kept to a relative value story, where U.S. inflation remained fairly low and paying more for oil and gasoline simply meant less demand and weaker prices for most everything else, with wages and salaries staying relatively constant. This would have meant a drastic reduction in real terms of trade and standard of living, and an even larger increase in the real terms of trade and standard of living for the oil exporters."
"The second outcome, which is what happened, was for a general inflation to ensue, so while OPEC did get higher prices for its oil, they also had to pay higher prices for what they wanted to buy, leaving real terms of trade not all that different after the price of oil finally settled between $10 and $5 per barrel where it remained for over a decade. And from where I sat, I didn’t see any deflationary consequences from the “tight” monetary policy. Instead, it was the deregulation of natural gas in 1978 that allowed natural gas prices to rise, and therefore, natural gas wells to be uncapped. U.S. electric utility companies then switched fuels from high-priced oil to what was still lower-priced natural gas. OPEC reacted to this supply response by rapidly cutting production in an attempt to keep prices from falling below $30 per oil barrel. Production was cut by over 15 million barrels a day, but it wasn’t enough, and they drowned in the sea of excess world oil production as electric utilities continued to move to other fuels."
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
In the narrative of Sumner and Friends, the supply shock of oil exacerbated the problem but it was primarily demand pull inflation that was the problem. It seems to me that one way to litigate this would be to look at the other costs in the economy-if most of the price increase was concentrated in oil that would seem to validate the cost push explanation but if other prices also spiked that would validate demand pull. Mosler here seems to agree that other prices rose but that this was just the effect of the rise in oil and then natural gas.
If anyone has more light to shed you know where to find me-LOL.
UPDATE: I did read the 'Seven Deadly Innocent Frauds' by Mosler a few years ago, but I've decided to read it again as I definetly know a lot more about economics than I did then. When I say that Mosler and the other MMTers like to boast about their market experience see him here:
"So, how am I uniquely qualified to be promoting these proposals? My confidence comes from 40 years’ experience in the financial and economic realm. I would venture that I’m perhaps the only person who can answer the question: “How are you going to pay for it?” My book takes on this issue and encourages the return of economics study to the operational realities of our monetary system."
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
This is different from how mainstream economists judge whether someone is qualified to discuss such issues-some base it on academic credentials or how many peer review articles have they published or whether or not they agree with the basic Neoclassical nomenclature-Ricardian Equivalence, monetary neutrality, the preference of monetary over fiscal policy, etc.
More than anything, mainstream economists want to establish that the person they're reading is an economist and not all are as narrow as my descriptions above. However, in their mind what matters is not whether you yourself have experience in the market but whether or not you have experience as an economist-Sumner says that to earn the status of being an economist in his yes, you don't necessarily have to be from an academic background. He allows that a layperson could be considered a 'real economist.'
No comments:
Post a Comment