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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

Yikes! We are growing way too fast

Another day, another data point showing an economy dangerously overheating. The economy grew at a 6.4% annual rate in the first quarter, a rate far too high to achieve the Fed’s inflation goals. Given that we are already overheating, we need a period of below trend NGDP growth. Over the past 12 months, NGDP grew by 10.6%. Some bureaucrats working at a place called the “Bureau of Economic Analysis” came up with a different estimate of economic growth—minus 1.4%—using a...

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How do we know that money is getting looser?

We don’t know for certain, but the evidence points that way.Ideally, we’d have a highly liquid NGDP futures market. Unfortunately, we are still in the Stone Age of macroeconomics. (Future generations will laugh at our ineptness, just as we laugh at 1930s and 1970s policymakers.)Without the NGDP future market, I usually start with 5-year TIPS spreads, which have been rising during 2022. They might be distorted by rising oil prices, so then I look at 5-year, 5-year forward TIPS...

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Why do they hate us?

When I travelled to China in the 1990s, America was highly respected. In a sense, they looked up to the US as a sort of model. Now many Chinese detest America. Many people are surprised when I tell them about this dramatic change. “What have we done to make them hate us?” I get very discouraged when I hear that response. How can well-educated people not know about all the things the US government has done to anger the Chinese people? Consider: 1. A former (and possibly...

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Why we need shock treatment

When it looked like the Fed would cut raise rates by 25 basis points last month, I favored 50. Next meeting they are leaning toward 50, and so naturally I favor 75.My views might seem inconsistent, but I am consistently favoring tightening policy by more than markets expect, because the expected rate of raising interest rates is not expected to achieve on-target average inflation.When the economy is in equilibrium, shock treatment risks pushing the economy into recession, and...

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Committing suicide in slow motion

Naturally I’m referring to the Democrats. Have you ever seen a political party so bound and determined to lose power?1. Bloomberg has an article on how the Democrats are trying to destroy the highly popular and effective charter school movement. With this year’s midterms looming and control of Congress hanging in the balance, Republicans are making inroads with voters by focusing on education, portraying Democrats as out of touch with the concerns of parents and captive to...

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Fake new, fake politics

Everyone knows that fake news is one of the big stories of the 2010s. But what about fake politics?In a sense, almost the entire GOP establishment is a fake organization. They pretend that Trump is their leader, publicly praising the man. But privately they view him as a corrupt leader that was deserving of impeachment. They won’t say this out loud, as they are afraid of their own voters.The NYT has a good piece on how GOP leaders like McCarthy and McConnell initially wanted...

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Articles of interest

1. Matt Yglesias points out that as America’s conservatives are rejecting YIMBYism, Canada’s conservative are embracing the freedom to build. Aitchison is not alone on the Canadian right. Conservative MP Raquel Dancho questioned the incumbent housing minister on land use regulation in Parliament on April 5, while interim party leader Candice Bergen said on April 7: “Canada’s housing crisis can’t be left up to municipalities to solve on their own. We need federal leadership to...

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Tell Matt to stop being so presumptuous

This Matt Yglesias tweet (discussing The Talented Mr. Ripley) caught my eye: Matt should speak for himself. I knew this film was a masterpiece when I first saw it in 1999. PS. For those who don’t get the joke, Yglesias frequently complains about annoying news headlines of the form: X is not what you think it is Matt is very smart, and generally knows what X is before being told by some stupid young reporter than he doesn’t know what they know. PPS. You guys...

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