Oh man, now I know how Krugman feels about those dastardly Austrians gaining more influence… That’s what I think every time National Review and now The Economist start running Sumnerian agit-prop.
Joking aside, help me out here guys (especially Bill Woolsey if you’re tuned it). The Economist piece says: “For all its theoretical merits, a switch to NGDP targeting would throw up some new problems—and old ones. The Fed has not exactly sat on its hands since the financial crisis began in 2007, so it is far from clear it could easily reach the new goal.”
So please clarify for me: Are you guys saying that the Fed needed to expand its balance sheet more than Bernanke actually did? Or are you saying he went about it the wrong way? I.e. if the Fed had been targeting NGDP all along, then it wouldn’t have needed to expand its balance sheet as much as Bernanke did (to little avail)?
If the latter, then why does your approach give a bigger bang for the reserve buck? Is it purely because of expectations, or is it because you’d have the Fed acquiring different assets?
(I think I know the answers to the above questions–I read Sumner almost as much as I read Krugman–but I want to hear a true believer explain it.)