The current Federal Reserve monetary policy framework has nothing to do with sound economics either, unless one considers keeping inflation at historical lows at the expense of recovery and everything else that would come with it sound economics. I haven’t seen many economist-bloggers specifically agree with what the FOMC has been doing over the last 4 years, at least none with anything to back it up, like proving that it delivers the certainty and stability that was promised and making the case that it is what society needs regardless of the opportunity costs and trade off of permanently lowering output and much higher NRU. If the FOMC strangles the economy long enough saying there’s nothing that can be done for employment, sure we will lose production capacity and raise the NRU, and then it becomes a self-fulfilling prophesy for the longer term.
If one takes a good look at primary economic indicators for 2008 forward, there isn’t anything there that illustrates price stability, quite far from it, and it misses completely the FOMC’s own stated policy of average 2% core PCE inflation over the medium term. When does the FOMC plan to do more in order for the medium term to average out to keep us on trend? It would be a step in the right direction if we could at least get that or an explanation as to why it isn’t particularly useful at the present time in more specificity than telling us how wonderful our new clothes look on us. Perhaps there is some aspect of the recession we are all missing? Please, point it out if you know what it is.
I am one who supports NGDPLT, but I am not narrow-minded on the topic. I don’t need perfect and will settle for baby steps in the right direction, but it is of absolute priority to get rid of the perfectly terrible policy of the status quo. My level of frustration with this seemingly unmovable but simultaneously untenable and unjustified policy reached a new high this afternoon with Ben Bernanke’s remarks regarding microeconomic suffering (Bernanke Says Economic Data May Mask Individual Suffering) as if he is totally blind to the same data you all have been looking at and pondering for years (there are countless graphs all over Marcus Nunes’ site, as well as Lars Christensen, Scott Sumner, and Evan Soltas, just to name a few). It reminded me of Marie Antoinette and “Let them eat cake,” especially after the FOMC released a statement 5 days ago that left me scratching my head, wondering what planet these people are from: ‘We know inflation is, has been, and will be well below our target and unemployment is, has been, and will be too high for the foreseeable future, but we expect as of yet unnamed confidence fairies to come bursting on the scene any year now to make it get better’.
All of this nonsense keeps coming out of the Fed and I see everywhere people piling on top of level targeting, NGDP level targeting as bad plans. Excuse me, but it can’t be worse than the plan that has been foisted on us that comes complete with a lost decade or more and an entire lost generation of young people. If these people cannot come up with a better plan, perhaps they should explain why the status quo is better (because it is reality if nothing changes) instead of fence-sitting in a quivering mass of noncommittal.
All it takes for evil to prevail is for good men to stand by and do nothing.