I was never in doubt about a determined central bank’s ABILITY to PASS a monetary target, not hit it like a bulls eye, but pass it like a tape at the end of a race. The runners keep running and may need sometime to slow down :)
A central bank can create a depression. Increase the rates to a level where no conceivable investment is feasible.
A central bank can create hyper inflation. Announce that you are willing to buy everything and start buying it. Somewhere along that route, measured nominal GDP would exceed the target laid out for it. So, the central bank can hit the target, by limiting its craziness.
My doubt in regards market monetarism was—is this a good thing to do, in the long run?
For supply side vs demand side issues, I guess the question to ask is if the productivity measurement is correct. If TFP is 1 % and you’re aiming at 6% NGDP growth, you’re just hurting the economy. Maybe, (don’t know for sure), britain was aiming at too high a growth rate.
I too have no doubt that the central bank can cause hyperinflation or severe deflation. The question is, can it thread the needle and get levels where it wants them to be? If during a velocity shock like 2007-8, the only way to get 5% NGDP growth is to alternate between 200% NGDP growth and −47.5% NGDP growth, then it seems like the cure is worse than the disease, in terms of providing the kind of stable monetary expectations that MMs agree are necessary for economic growth, investment, etc.
Suppose we have a patient with a fever (or pneumonia). The doctor is unable to stabilise the patient’s temperature. It’s true that if we throw her in an ice floe she’ll be too cold, and if we throw her in an oven she’ll be too hot, but that doesn’t prove that we can stabilise her temperature, and I sometimes feel that Market Monetarists are coming uncomfortably close to making this argument.
I doubt that there will be that much variation since even if you look at it, you are considering a sale of assets or a purchase. There are thousands of such transactions happening everyday. That range of fluctuations doesn’t happen. I’m not great fan of central planning, but I think that NGDP or nominal wage targets are possible to hit without a 100% variation.
Thanks for your patience and civility.
I was never in doubt about a determined central bank’s ABILITY to PASS a monetary target, not hit it like a bulls eye, but pass it like a tape at the end of a race. The runners keep running and may need sometime to slow down :)
A central bank can create a depression. Increase the rates to a level where no conceivable investment is feasible.
A central bank can create hyper inflation. Announce that you are willing to buy everything and start buying it. Somewhere along that route, measured nominal GDP would exceed the target laid out for it. So, the central bank can hit the target, by limiting its craziness.
My doubt in regards market monetarism was—is this a good thing to do, in the long run?
For supply side vs demand side issues, I guess the question to ask is if the productivity measurement is correct. If TFP is 1 % and you’re aiming at 6% NGDP growth, you’re just hurting the economy. Maybe, (don’t know for sure), britain was aiming at too high a growth rate.
I too have no doubt that the central bank can cause hyperinflation or severe deflation. The question is, can it thread the needle and get levels where it wants them to be? If during a velocity shock like 2007-8, the only way to get 5% NGDP growth is to alternate between 200% NGDP growth and −47.5% NGDP growth, then it seems like the cure is worse than the disease, in terms of providing the kind of stable monetary expectations that MMs agree are necessary for economic growth, investment, etc.
Suppose we have a patient with a fever (or pneumonia). The doctor is unable to stabilise the patient’s temperature. It’s true that if we throw her in an ice floe she’ll be too cold, and if we throw her in an oven she’ll be too hot, but that doesn’t prove that we can stabilise her temperature, and I sometimes feel that Market Monetarists are coming uncomfortably close to making this argument.
I doubt that there will be that much variation since even if you look at it, you are considering a sale of assets or a purchase. There are thousands of such transactions happening everyday. That range of fluctuations doesn’t happen. I’m not great fan of central planning, but I think that NGDP or nominal wage targets are possible to hit without a 100% variation.