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The author Scott Sumner
Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

S. Sumner: Money Illusion

Instrumental beliefs, prediction and reality

Note:  Feel free to skim past the philosophy to the discussion of monetary policy at the end. In a recent podcast, Penn Jillette said something to the effect that people don’t believe conspiracy theories because they are true, rather because they are entertaining, like a good story or a good song. The term ‘entertaining’ has a rather frivolous connotation, so lets make the concept more general and include beliefs that add deep and profound meaning to life, in areas such as art,...

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Recessions in a post-inflation world

The Financial Times has an article pointing out that inverted yield curves are not a foolproof predictor of recessions, a point I’ve frequently made. (It’s actually a pretty good forecasting tool, just not perfect.) In the article, Gillian Tett cites BIS research: But as this inversion-watching game intensifies, it is worth reading a recent paper from the Bank for International Settlements, the central banks’ bank in Basel. It suggests that term spreads — what the shape of the...

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UK endorsements

Liberal Democrats > Conservatives >>>>>>> Labour In England and Wales vote for Liberal Dems where they have a chance, otherwise vote Conservative. In Scotland, replace Liberal Democrats with Scottish nationalists. I presume the Northern Irish will vote for their tribe. Wales? I know nothing about Wales. I expect the Conservatives to win. Will Brexit be delayed long enough for Bryan Caplan to keep his perfect record intact? PS. Tony Blair is a sad...

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Asking the wrong question

David Beckworth recently directed me to a paper by Gauti Eggertsson and Kevin Prouix, discussing how much QE a central bank might have to do when in a liquidity trap: The required intervention in real assets needed to generate this outcome in Eggertsson (2003) corresponds to about 4 times annual GDP. Moreover, the intervention is conducted under the ideal circumstances under which the assets bought are in unlimited supply, their relative returns are not affected by the...

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How do conservatives feel about this?

This survey caught my eye: Western conservatives tend to dislike Islamic fundamentalism. Western conservatives tend to dislike atheism. So here’s a question for conservatives: If these surveys are correct (a big if), what does it portend about the future of civil society in the Middle East? I’m not conservative, and I don’t see this as either good or bad. But it may be a symptom of certain trends, which might be good or bad. PS. This caught my eye: In a...

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Rate cuts increase the Fed’s “ammunition”

I keep seeing this sort of comment: Federal Reserve Bank of Atlanta President Raphael Bostic said he opposed last week’s interest rate cut because two earlier reductions had provided insurance against global risks and the central bank needed to preserve its ammunition. It would be interesting to do a search of the Fed minutes and see how many Fed officials are mixed up on this issue. Tags:      

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The worst president ever

Dozens of sources provide similar accounts, but this WaPo story is especially vivid: Senior Trump administration officials considered resigning en masse last year in a “midnight self-massacre” to sound a public alarm about President Trump’s conduct, but rejected the idea because they believed it would further destabilize an already teetering government, according to a new book by an unnamed author.. . The author — who first captured attention in 2018 as the unidentified author...

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If you aren’t confused by the lack of mini-recessions, then you don’t understand the issue

It’s often said that if you think you understand quantum mechanics, then you don’t actually understand it. That may not be true of Eliezer Yudkowsky, Scott Aaronson and Robin Hanson, but it’s true of most average people. (Thankfully, I don’t even think I understand it.) Whenever I discuss the lack of mini-recessions, commenters will offer explanations. One argument is that the highly diversified nature of the US economy leads to shocks in one sector being balanced out with growth...

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Danger: Snowflakes falling on stairs

The New York Times has a piece on Long Island City’s acclaimed new library: In his 2010 renderings for the children’s wing, Steven Holl, the project’s lead architect, had sketched images of children reading on bleacher-like seats that spanned from the lower level of the wing to the upper one, adjoined by an interior staircase. But library officials, in a walk-through before the building opened, instead saw a potential liability for small children who could jump and fall on them....

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Sahm’s Rule and mini-recessions

A business cycle forecasting tool developed by Claudia Sahm has recently attracted some media attention.  This is from a WSJ article: Sahm suggested that she got the idea from Jason Furman, who heard about the idea from Doug Elmendorf.  Back in 2011, I had a similar insight in a blog post on mini-recessions (or more specifically the lack of mini-recessions): I searched the postwar data, which starts at 1948 and covers 11 recessions.  During expansions I found only 12 occasions...

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