10 Jan 2013

While I Was Bogged Down With Keynesians, Sumner Solidifies His Power Grab

Economics, Federal Reserve, Market Monetarism, Scott Sumner 15 Comments

Oh man, have you kids been checking in with Scott Sumner lately?

==> Famous monetary economist Frederic Mishkin has now been seduced by the Dark Side.

==> Sumner thinks the trillion dollar coin is bad for the Democrats politically, but if Obama “ignores my advice and mints the coin anyway, I’ll strongly support the move since…it will be a sunk cost and I’ll try to minimize the damage by convincing the public that it’s better than default.”

==> You think maybe we should just give Scott’s ideas a trial run, maybe for two years, and then try something else if they don’t work out so hot? Well in a post with the ominous title “There’s no going back” Scott writes:

Once we shift to NGDPLT, there won’t be any going back, because NGDPLT is far superior to inflation targeting. Whenever inflation and NGDP diverge sharply, the Fed will be under tremendous pressure to target NGDP, not inflation. For instance, if inflation rises to 2.8% due to an oil shock, and output growth falls from 2.5% to zero, the Fed will cut rates, not raise them as inflation targeting would imply. Eventually central banks will stop paying attention to inflation.

* * *

So, if you are against the central bank buying a trillion dollar coin from the government so it can evade limits on its ability to issue more public debt, and/or if you think the central bank ought to pay very close attention to (price) inflation, then you can understand why Sumner must be stopped…no matter the cost.

15 Responses to “While I Was Bogged Down With Keynesians, Sumner Solidifies His Power Grab”

  1. guest says:

    If we all just make a decision to refuse to accept fiat money in payment, then we could be done with this in fairly short order.

    • Major_Freedom says:

      You’ll still have to pay taxes in fiat money on the non-fiat earnings you make.

      Which means you must go out and find fiat money somehow.

      Which means you’re right back in the fiat money prison.

      Happy new year.

      • Bob Roddis says:

        And you will probably pay a 28% capital gains tax rate (unless this was changed by the fiscal cliff bill) on any exchange using non-fiat money. However, if one did not face such taxes, would it really be that hard to trade appreciating assets for depreciating funny money in order to pay taxes? I’m suggesting that it’s the assessment of taxes on the trades when using non-fiat money and on the transactions to turn assets into fiat money that are probably more restrictive than simply having to obtain funny money to pay taxes.

        This never stops that always honest Keynesians from chortling that people would much rather use funny money than precious metals. I wonder why?

      • guest says:

        Happy new year.


        But you’re forgetting that sound money restricts government.

        So, if we just refuse to use fiat money, eventually the government won’t be able to enforce their tyranny.

        There are enforcers out there who pretty much just want to be employed, and they figure that “government jobs are secure”, so they do their part for the state tyrants.

        We can cripple the regulators by just not using fiat money.

        • Matt Tanous says:

          You would need to accept tax avoidance punishment, as well. You aren’t going to get a refusal to use fiat money without a simultaneous refusal to pay taxes…

          • guest says:

            That’s only because the government is breaking the law which says that states may not make anything but gold and silver coin a tender in payment of debts.

            Also, the 16th Amendment was not lawfully ratified, and so is not law.

            I like to pay for lawful taxes. Much of that for which government taxes, however, is not lawful.

    • Tel says:

      In theory it is still legal tender to just do all business “on account” which means no money changes hands, but you just write it up in the book. That means you are trading in standard currency, without any currency.

      You do have to find people willing to work with you on this, and generally speaking the taxman will ask for something more tangible.

      Doesn’t protect you against price inflation, but if your predictions are good you can factor future inflation into your payment agreements.

  2. Ken B says:

    Say, whatever happened to the Sumner debate plan?

  3. Jonathan M.F. Catalán says:

    That excerpt is interesting, because in Boom and Bust Banking, I think (I don’t have the book with me right now; it may have been another author), Beckworth argues that the Fed shouldn’t cut rates in response to supply shocks. The only thing I remember reading is that the Fed should tolerate the higher price level that results (the way I envision it is that the increase in the price level compensates for the drop in real GPD growth, so that NGDP remains on target).

  4. Tel says:

    … it will be a sunk cost and I’ll try to minimize the damage by convincing the public that it’s better than default …

    Because that’s the job of economists, to convince the public of random shit, while angling for that plumb job as an establishment spruiker.

  5. Bob Roddis says:

    University of Chicago law professor Eric Posner, son of Judge Posner, suggests that the platinum coin might be found illegal using present day legal analysis (which precludes analysis of the actual meaning of the Constitution). The language of statutes is often interpreted by courts using statements that make up the legislative history of those statutes. The purpose of the statute was clearly to provide authority to the mint to strike COMMEMORATIVE platinum coins and sell them at their bullion value plus “a reasonable profit,”


  6. Bob Roddis says:

    Hoppe has obviously been listening to me (just kidding) on the issue of getting bogged down in minutiae when debating the bad guys as opposed to basic principles.


    For the record, I also think it’s important to debate the minutiae.

  7. Blackadder says:

    I’d just like to point out that in the Transformers clip Bob linked to, Optimus Prime ends up dying whereas Megatron gets rebuilt as an even cooler looking robot. So perhaps that’s not the best strategy to emulate.

    • Bob Murphy says:

      He stopped Megatron, at very high cost. I regret that I have but one life to give for sound money.

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