Monday , March 30 2020
Home / S. Sumner: Money Illusion / The good, the bad, and the ugly

The good, the bad, and the ugly

Summary:
The good: Letting inflation rise temporarily during an adverse supply shock, as the EC101 textbooks recommend. The bad: Holding inflation right at the target when there’s an adverse supply shock and saying to hell with the unemployed, as the inflation-phobic German central bankers recommend. The ugly: Allowing inflation to fall sharply during an adverse supply shock. Guess which option America has chosen? David Siegel interviewed me for an hour on the role of monetary policy during the C19 crisis: [embedded content] In the near future I expect to do several more such interviews. Off topic: File this under “nobody knows anything about politics” (a reference to the old Hollywood saying about films.) A few months back I recall Ross Douthat saying

Topics:
Scott Sumner considers the following as important:

This could be interesting, too:

Tyler Cowen writes Price dispersion and pandemics

Tyler Cowen writes Sunday assorted links

Tyler Cowen writes Where does all the heterogeneity come from?

Scott Sumner writes There are no mask opponents in a foxhole

The good: Letting inflation rise temporarily during an adverse supply shock, as the EC101 textbooks recommend.

The bad: Holding inflation right at the target when there’s an adverse supply shock and saying to hell with the unemployed, as the inflation-phobic German central bankers recommend.

The ugly: Allowing inflation to fall sharply during an adverse supply shock.

Guess which option America has chosen?

David Siegel interviewed me for an hour on the role of monetary policy during the C19 crisis:

In the near future I expect to do several more such interviews.

Off topic: File this under “nobody knows anything about politics” (a reference to the old Hollywood saying about films.) A few months back I recall Ross Douthat saying that Trump had no chance to win if the US were in recession. Well, we are likely to be in a depression on election day, and he’s still favored to win in the betting markets (albeit only slightly.) If you had told me that a very unpopular president would run for re-election during a depression and have an even chance of winning, I would have thought you were crazy. Especially given the fact that while the epidemic was an exogenous shock (bad luck) he certainly didn’t take it at all seriously for several months. Biden could run commercials of Trump seeming to minimize the threat. The government itself (CDC, etc.) screwed up badly. Even though that’s not primarily the president’s fault, voters used to blame presidents when their administration screwed up.

And Trump will still probably win.


Tags:

 
 
 
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".

Leave a Reply

Your email address will not be published. Required fields are marked *