I am being sincere when I say that I’m not accusing him of skullduggery, but I’ve noticed that sometimes Scott Sumner’s descriptions of the data lead the reader to imagine something far different from the reality. A good recent example of this is Scott’s discussion of his theory that it was (purposelessly) tight monetary policy that brought on the Great Recession:
Inevitably when I make this argument there are a few tiresome “people of the concrete steppes” who insist the Fed did not cause the recession, they merely failed to offset the fall in velocity. Unfortunately they haven’t bothered to look at the data. After rising at roughly a 5% rate for many years, the Fed brought growth in the monetary base to a complete halt between August 2007 and May 2008. That triggered the onset of recession in December 2007. Velocity actually rose during that 9 month period, but not enough to offset the Fed’s tight money policy. [Bold added.]
So from the sentence I put in bold–and especially to understand why the second greatest financial crisis struck the world in the fall of 2008–Scott’s innocent reader would assume that annual growth in the monetary base had bounced around in a fairly narrow band centered on 5% for at least 10 (?) years, with this steady 5%-ish growth chugging along until July 2007. Then, this pattern was completely disrupted starting in August 2007, when growth in the monetary base fell off a cliff.
Yet if we go look at the actual data, they don’t remotely resemble Scott’s story:
Don’t get me wrong, the above chart makes it a little awkward for other Austrians and me to tell our preferred story, namely that it was massive Fed inflation that fueled the housing bubble. (I have tried to do so e.g. here and here. But my point is, it would be easier to convince skeptics if the surge in the monetary base had been higher in the early 2000s than in practice it was.) But for sure, the above chart doesn’t seem to line up at all with the narrative Scott is spinning in the block quotation.