Which will mean nothing to anyone reading.
But since I started writing about Quantitative Easing, I have had a Google alert feeding into my Google Reader, triggered by news containing the words “quantitative easing”. This has fed about 50 items a week into my already stuffed inBox, and as some kind of punishment I have vowed not to turn it off until I was happy that Credit Where It’s Due had gotten its rightful attention.
That moment has finally come. Scott Sumner’s blog has mentioned the piece in passing, as part of Sir Samuel Brittan’s column of a week or two back.
Given that the Times, the FT and even the Telegraph have given support to the paper, you might wonder why I choose this particular event. But it has a fitting circularity. Sumner’s blog got me started on this topic. I have shared a recommendation of his (though one Sir S B has been advocating for a while now): for the Bank to target nominal GDP growth instead of just inflation. This idea has quite a following now: see this post on MacroMusings, for example. I am joining a throng as a junior member.
But the surprising thing is that I was drawn to Sumner’s blog because of how much I disagreed with its startling opening premise: that the recession of 2008-9 could have been entirely avoided if only monetary policy had been loose enough. Simultaneously aware that (a) I was in the company of far deeper macro-economists that me, and (b) they were saying something I could not agree with, I kept returning and returning to the blog, trawling through comments, even eavesdropping on debates with Cochrane about the feasibility of Sumner’s ideas.
The process of trying to square these irreconcilables has been incredibly educational. I still don’t think that any feasible monetary policy could have prevented the slump. I still think that ‘real’ variables, like
- ‘animal spirits’
- the sudden ‘debt-aversion’ of drastically indebted entitities (see Richard Koo’s stuff)
- and a broken credit channel (which Bernanke proved had an independently vital effect on economies)
made the recession practically unavoidable, and for conventional reasons; read enough about the Lehman’s disaster (Greenspan is excellent on the severity of the crunch) and it is hard to believe that any monetary stance could have mitigated the massive credit spreads, capitalization concerns and sheer panic.
Yet I found that Sumner’s prognosis for what to do now – target NGDP growth – was still excellent, even if his faith in the mechanisms required (real money balance demand? I misquote) leaves me remaining to be convinced. So you get a paper that many purists would dislike; one that learned from the Professor that monetary policy can do much more, a great deal through the expectations channel, but which nevertheless thought real credit conditions, bank capitalization and a government willing to provide demand when the private sector won’t, were all still vital to the solution.
So I turn off “Google quantitative easing”. Phew. I remain RSS-ed to ‘The Money Illusion’, and look forward to when Sumner’s book on the Great Depression is finally out there. I expect to be entertained and infuriated in equal measure, and above all educated.