Taper Talk and the Fed's Monetary Stance: Scott Sumner vs. Marcus Nunes

     I recently attempted to ask Marcus a question as it seemed to me that he and Sumner have made comments on the stance of monetary policy that are flatly in contradiction. Here is what Marcus said recently:

    "Not Bernanke. He decides instead to taper! Stimulus is certainly being reduced, no matter that the economy is still far from anything resembling a reasonable path for NGDP, and even below the pre-recession price level path."

     http://thefaintofheart.wordpress.com/2013/07/08/slaves-to-zero-rates/

     Now what I noticed with some interest is that Sumner seems to disagree on the stance of current Fed policy. For the record I tend to agree with Marcus. Yet, here is what Sumner said in a recent post:

    “I use the term “tapering” because I don’t mean to suggest than monetary policy will gradually become more contractionary, indeed I expect just the opposite. But it will look more contractionary to most people.”

    http://www.themoneyillusion.com/?p=22156

    I asked two MMers-Marcus himself and Benjamin Cole what they might think Scott means here. Neither chose to attempt to answer. I was truly curious as Sumner seems to be arguing that Fed policy is easier even with 'taper talk.' 

    Today I see that Sumner himself has an answer-not to me directly, of course, but he does explain what he means:

     "Monetary policy has probably become easier over the past few months. I say ‘probably’ because we lack a NGDP futures market. But consider that stock prices have not changed much in the last few months, and the interest rate at which future cash flows are discounted has risen substantially. We can infer that expected future nominal cash flows are now larger than a few months ago. This doesn’t mean that expected future NGDP has risen, but that seems likely. Note that earlier when I discussed the response of the stock market to recent tapering news I forgot to account for the higher discount factor. I’m indebted to a commenter whose name I forget for pointing that out."

    "I’m still puzzled by the response of long term rates to the tapering talk. But if long rates always moved the same way in response to monetary news, then interest rates would no longer be a lousy indicator of monetary policy."

      http://www.themoneyillusion.com/?p=22205#comments

      Sumner goes on to note the commentator is Andrew. So this is what he means-the discount factor suggests easier money-stocks have stayed at the same price with interest rates spiking. 

      Again, then does Sumner differ here with Marcus? I'd be interested to know if Marcus agrees with Scott here or not. I'm not trying to cause trouble just find it an interesting divergence and am interested in some clarity. 

       Note that when Sumner says this:

        "I’m still puzzled by the response of long term rates to the tapering talk. But if long rates always moved the same way in response to monetary news, then interest rates would no longer be a lousy indicator of monetary policy."

        He's doing more than taking just one more pot shot as a meanginful indicator for the stance of monetary policy-he's also trying to show that the fact that he was wrong about interst rates-he had expected them to drop-is not important anyway-yes, he made a bad prediction but what do predictions matter anyway as we believe in the EMH, right?

      "No one likes to be contradicted.  But I must admit that the markets are increasingly pointing to the likelihood that I’ve been too pessimistic about both the prospects for growth, and the likelihood that ultra-low interest rates would persist for longer than most people assumed.  What do they see that I don’t?"

     "EMH fans like myself can’t get too depressed about being wrong in market forecasts, as we are ALWAYS WRONG when any asset price changes significantly in a short period of time.  That’s because in most asset markets the current price is quite close to the expected future price 6 or 12 months forward.  All big changes are unexpected.  I get a little more uneasy, however, when I can’t quite see the reason for the change, even after it has occurred.  I’d guess that in a few years this will all become clear."

        http://www.themoneyillusion.com/?p=22156