I’m not sure why I’ve been on the warpath against Scott Sumner lately. Maybe it’s because he was on hiatus for a lot of the summer, so my angst built up. Maybe it’s because I didn’t get accepted into the Chicago doctoral program and he did. Who knows.
Anyway, in a recent post Scott continues to astound me. Now, not only does Scott still maintain that Bernanke has been engaged in tight money since 2008 (!!), but there are really no other possible explanations:
There is only one force in the economic universe powerful enough to cause trillions in asset values to suddenly disappear, for no apparent reason. To cause nominal incomes to plunge further and further below trend, causing massive job loses. The center of the black hole sees itself as a force for good, helping to solve the problems it is actually creating. Others see it as a potential source of help, which is not acting forcefully enough. Both are wrong. It’s the center of the black hole. It’s pulling down the things we see disappear over the event horizon. But we can’t see it, and hence most of us don’t understand the problem. It’s the only force capable of determining NGDP growth over time. It’s the force that several decades ago decreed that henceforth NGDP will grow at about 5%, not 11% or 3%. It said “let there be 2% inflation.” And the force saw the 2% inflation, and saw that it was good. Only one force in the universe could pick a 2% inflation rate out of thin air, and make it happen.
It’s the part I put in bold that stunned me. “[S]uddenly disappear, for no apparent reason”??
By the end of the above quotation, you might be getting uncomfortable, since Scott is bordering on blasphemy. But don’t worry, Scott isn’t saying the Fed is God. To continue the above quotation:
“Is it God? No, it’s much more powerful than that. And since mid-2008 the force has decided that 1.4% annual NGDP growth is good enough.”
I still maintain that any day now, Scott is going to put up a post saying, “Gotcha! I can’t believe I managed to convince all of you that the problem these past 3 years has been inadequate money pumping. Ha ha, like nationalizing banks and car companies, 10% deficits, taking over health care, having the EPA threaten to put 95% of the country in non-compliance, and extending unemployment benefits for 99 weeks don’t affect the economy. It was all I could do to keep a straight face when arguing with that punk Murphy down in Nashville, who was the only one who didn’t fall for it.”