Sumner

Here is Sumner (essentially a monetarist) saying kind of the same thing I have been saying but in less alarmist language. 

It’s hard for me to tell the Fed what to do, because I don’t know where they are trying to go.  Go back to the ship analogy.  Suppose the captain is rather secretive, and will only indicate that he is aiming for a large port in the northeastern US.   He also says that due to wind and current he expects to end up somewhere around Charleston SC.  What sort of advice should we give him?  First, at a minimum he should turn the wheel to the right, to nudge the ship onto a more northerly course.  And second, he should pick an explicit target, and let his crew know which city he is aiming for.  Then his crew could help him decide how to set the steering mechanism at a position expected to produce on target sailing (accounting for wind and currents.)

Right now the Fed has two problems.  They won’t tell us their goal, and they won’t set policy at position expected to reach their (secret) goal.  We know they’d like inflation and employment to be a bit higher, but we don’t know how much higher.  We know they have set their policy levers at a position where they expect to fail, i.e. they hope NGDP grows a bit faster than their forecasting unit expects, not a bit slower.  But we don’t know how much faster.  If I knew their goal I could give advice on how to achieve the goal.  Instead, all I can recommend is “more.”

The difference is that he just thinks they should stop behaving this way.  I think we shouldn’t give them the power to behave this way.