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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

Why does money matter?

If someone asks you why monetary policy is so important, you might mention the business cycle, and/or financial crises. But suppose they ask you how you know that monetary shocks cause business cycles? How would you answer? One reason that market monetarists remain in the distinct minority is that this question is really hard to answer, indeed harder than almost any other question. You can’t just say “because blah, blah blah”, you have to carefully lay out a very complex...

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Time to put conspiracy theories into a burial urn

In the past, I’ve criticized claims that 40,000 Wuhan residents died of Covid19, roughly 16 times the official total. While the official total undoubtedly missed some cases, I find it implausible (but not impossible) that it was that far off. Most experts believe the actual mortality rate from coronavirus is around 1%, or perhaps 2% at most, if one accounts for all the mild cases that are never tested. And unlike Italy, Wuhan does not have a large population over age 70.  So the...

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Tomorrow’s news, today

Suppose you want a heads up on what the news media will be talking about in a few weeks. Where do you go to find it? In the blogosphere. On March 1, I did a post questioning the conventional wisdom on masks. Now the media is full of these stories. I did numerous posts on the mystery of Germany’s low mortality rate. Now the media’s full of them. I did several posts on the relative success of California and Washington. Now check out this news headline from today: Flattening the...

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Just my luck

Patrick Horan and I produced a new Mercatus policy brief on improving the Fed’s toolkit. I did a long interview on money with John Papola. (He did that famous rap video of Hayek debating Keynes.  And a Mises/Marx video as well.) Unfortunately, my interview is likely to be considerably less entertaining. But if you’re stuck at home. . Last year I thought that whatever happened would be good for market monetarism. If NGDP growth slowed and we had a recession, we could say “We...

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Good news on warm weather?

I don’t have any axes to grind on coronavirus (except perhaps on masks), so some of my posts may seem to conflict. But they probably conflict less than you assume. Earlier I did a post questioning whether summer would make the problem go completely away, pointing to a rapid rise in coronavirus cases in many tropical countries. Today, I’ll present three pieces of evidence that warm weather will help at least somewhat: 1. Warm weather in the US seems to help. The three big warm...

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Europe’s even worse off than we thought

Here’s the Financial Times: On Tuesday night, the health authority in the Grand Est region said two-thirds of its 620 old people’s homes had been affected by the coronavirus pandemic and 570 residents had died. Those 570 people are not recorded in France’s official coronavirus death toll, which reached 4,032 on April 1, but so far counts only those who have died in hospital. Eastern France, which has had 1,112 hospital deaths, was the first region in the country to be badly hit...

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And the portions are so small!

Ray Lopez (or perhaps the blogger that recently stole Ray’s name) directed me to this: Hong Kong (CNN) In the coming weeks, if they have not already, your government is likely to begin advising you to wear a face mask to protect against coronavirus. For those living in Asia, such announcements will be a vindication of a tactic that has been adopted across much of the region since the beginning of the crisis and appears to have been borne out by lower rates of infection and...

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Infrastructure spending will not create jobs

This caught my eye: President Donald Trump called on Congress to provide $2 trillion for U.S. infrastructure, seizing on the coronavirus outbreak to try once again to advance one of his longest-standing priorities. Sorry, but when did we switch from talking about spending bills in the billions to spending bills in the trillions? When did trillions become a “thing”? Right now, we are losing lots of jobs because people are unable to work. Fiscal stimulus won’t change...

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Those Chinese never seem to learn

This Bloomberg headline really makes me angry: When will the Chinese learn? Censoring doctors who are trying to warn the public about failures in the response to coronavirus will always backfire, just making the problem worse. You’d think that after what happened in January in Wuhan the Chinese would have learned their lesson. Oh wait. Tags:      

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More confirmation that the Fed is never out of ammo

Market monetarists knew this all along: Should conditions on Wall Street deteriorate significantly, the central bank could go where it’s never gone before: to passively intervene in the stock market for the first time ever, according to market analysts and economists. ..  The Fed would need congressional permission to extend its operations, but it already has received wide latitude from the Treasury Department through emergency provisions in the Federal Reserve Act. “If there...

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