I read a post recently about the argument often made against NGDLT that “the public” either more clearly understands inflation targeting or doesn’t understand NGDPLT at all, and I thought I’d weigh in on the assertion in my special dajeeps prose.
The first point to make is the rather troubling issue of interpretation of the level of interest rates. I perhaps am being a little unfair here, as the central bankers muddy the waters with the interest rate peg and unnecessarily complicate communication about the meaning of movements in short nominal rates. So if someone who reads Friedman’s scholarship on the matter and still doesn’t understand what persistently low nominal rates means, then it can probably be said they understand almost nothing about whatever target is achieved by the rate peg.
Looking at it this way, almost nobody has understood the nature of the IT in use.
But that doesn’t mean that “the public” ultimately doesn’t get it. While almost nobody understands the complexities involved in what the Fed has done with monetary policy over the last decade, it does not mean that they do not “feel” their way to a roughly right answer. And I think from what they understand about at least the Bernanke Fed’s IT, they really hate it.
Now why anyone would argue for a policy that results in something like this, I just can’t imagine.