So it seems that James Bullard, President of the St Louis Fed is starting to warm up to the idea of NGDP targeting. At least he is for the next few days or so, until someone makes mincemeat out of him politically for trying to step away from IT. Scott Sumner has a good rundown of the paper Bullard co-authored that hints that NGDP targeting would have made the 2008 crisis much less of a crisis.
I hate to lob meat missiles at a guy when it looks like he might on the right track. But I look toward this development with much less than anticipatory excitement.
I’ve done some digging through my archives and found reference to nice little Bullard gem from 2010, Seven Faces of the Peril that discusses the Fed’s brush with becoming Japanese. Read the paper for the full skinny, on the extent of what Mr. Bullard knew and when he knew it, but here is what I wrote about it:
The paper written by Mr. Bullard in 2010, Seven Faces of the Peril … postulates that according to Taylor Rule calculations, the FF rate would have needed to be negative 4 to negative 6 percent to stabilize the situation. Interest rate policy setting was no long appropriate for the situation.
I suppose this paper, especially because of when it was written, sort of destroys the notion of ignorance and stupidity that money was tight. And I have to say that 2010 was a very terrible year for an awful lot of people as the FOMC nibbled around the edges of monetary policy so tight one could beat it like a drum with Operation Twist.
And of course, going into 4Q14, Mr. Bullard was out again talking about market expectations of future monetary policy actions not being in line with the Fed’s. Think he got his wish in 1Q15?
My blog is littered with instances pf Bullard having written this paper and then saying doing the opposite at every opportunity all throughout the Great Recession.
I’d really rather see him put actions where only his pen has gone before. Then, I’ll be excited.