Seeking to bolster my self-esteem, I re-read my prescient warning back in April that the stock market was overvalued and people should sell. Here’s what I wrote about Scott Sumner (the guy who has made a name for himself by declaring that our problems are due to Bernanke’s tight-money policies):
Well Scott Sumner has hung up the keyboard. In his “I’m not really serious but actually I am” kind of way, he takes credit for quantitative easing and several trillion dollars in new wealth. It’s too long to reproduce the argument here, but he’s basically saying that bloggers forced Bernanke / gave him the support to inflate more, and that has resuscitated global stock markets.
Don’t worry Scott, you are not being arrogant. I too hold you fully responsible for what happens to the world economy.
I was being somewhat tongue in cheek, but it really is true that Scott has done more than any other person in getting mainstream economists to flip on this issue. Check out Tyler Cowen’s remarks today about the possible S&P downgrade:
3. I don’t expect anyone to change their mind at this point, but the “we should have had a much bigger stimulus” argument is unlikely to go down in intellectual history as the correct view. Instead, Ken Rogoff and Scott Sumner are likely to go down as the prophets of our times. We needed a big dose of inflation, promptly, right after the downturn. Repeat and rinse as necessary. But voters hate inflation and, collectively, we proved to be cowards. Too bad.
Really, let’s not have target practice with “beltway libertarians” blah blah blah. That’s not my point here. My point is, how in the world has the economics profession gotten to this point, where it is “cowardice” to not think that multiple bursts of inflation are the key to prosperity? (And where doubling the monetary base in a single year is not enough inflation the first time?)